Etihad Airways’ latest equity deal could see its new Italian partner, Alitalia; grow in the American and Asian markets as part of its new long-haul expansion strategy, Gulf News has said.
Etihad announced last week it will take a 49 per cent stake in Italy’s troubled Alitalia. The all but done deal, which must still be approved by the European Commission, will mean a complete overhaul of the airline including new long-haul routes.
The paper said analysts expect that Etihad will now push Alitalia to increase routes into Asia. There is significant opportunity in the east for Alitalia, which currently only flies to Japan in Asia while Italy is the sixth most visited country in world with 46 million visitors in 2013.
“China will be a growth focus, where Etihad is constrained on bilaterals but also where Alitalia has opportunities for China-Italy/Europe growth,” said Will Horton, senior analyst at CAPA Centre for Aviation.
James Hogan, Etihad’s president and chief executive, declined last week to state the new routes but said Alitalia will increase its widebody fleet by 32 per cent under the restructuring plan. This means seven more aircraft to Alitalia’s existing widebody fleet of 22, according to CAPA.
“Alitalia will renew its image and the look of aircraft over the next year as the minority owner exerts influence on the operation and implements the new business plan,” said US-based aviation analyst Ernest Arvai, chief executive of The Arvai Group Alitalia’s long-haul expansion means ten long-haul routes will be added to the network over five years, including five new routes over four years at Rome Fiumicino.
“The Alitalia brand remains positive, and expansion internationally will provide additional opportunities to generate premium traffic, particularly in concern with Etihad at the Abu Dhabi hub,” Arvai said.
The restructuring also includes plans to more than double long-haul weekly flights out of the currently underutilised Milan Malpensa to 25.
“Long-haul is the real potential for profit. Milan is the centre of Italian business demand and something which Alitalia had largely withdrawn from,” said John Strickland, Director of UK-based JLS Consultants.
Building on the Abu Dhabi hub Alitalia’s expected Asian routes could very well operate via Etihad’s Abu Dhabi hub. The nearly 30 per cent Etihad-owned Air Berlin flies to Phuket, Thailand through Abu Dhabi, while the 40 per cent owned Air Seychelles also flies through the emirate on the Paris route.
Arvai said the restructuring plan will “capitalise on Etihad’s Abu Dhabi hub for traffic feed.” By giving Italian passengers more choice at Abu Dhabi with Etihad’s network to the Middle East, Asia, Africa and Australia, the Abu Dhabi airline should be able to boost load factors and ultimately revenue.
Latin America focus Alitalia could also stretch its reach into Latin America, where Horton said there is “room for more” for the Italian carrier, however, he pointed out Etihad already has a non-equity partnership with Spain’s Air Europa. Etihad also signed an agreement with JetBlue earlier this year to codeshare to destinations in the Caribbean and South America.
However, the JetBlue and Air Europa codeshares to the Caribbean and Latin America are still pending regulatory approval, Etihad confirmed on Thursday.
While Hogan has warned “there is no easy fix” to Alitalia’s woes, he has outlined a three-year turnaround strategy that sees the Italian carrier post a 100 million Euro profit in 2017 and a return on Etihad’s ?560 million investment.
“New routes typically take some time to become profitable, so an instant turnaround is not on the cards for Alitalia,” Arvai said.
The turnaround includes cutting unprofitable short-haul routes and decreasing the narrow-body fleet from its current size of 90 aircraft to what CAPA expects to be a fleet size of 78.
“Short-haul is a real challenge. Powerful low cost carriers are well established in both Milan and Rome, and have added capacity this summer putting enormous pressure on Alitalia’s financial results,” Strickland warned.
Source : WAM News Agency for United Arab Emirates
