After close to 74 years of operations, Italy’s national airline Alitalia handed over the baton to its successor, ITA Airways, on October 15, 2021. The rebranded flag carrier commenced operations with a domestic flight from Milan Linate to Bari, and kicked off long-haul international service from Rome Fiumicino to New York JFK at the start of November. Simple Flying was fortunate enough to sit down with the Chief Executive Officer of ITA Airways, Fabio Lazzerini, during the World Aviation Festival in Amsterdam last week to talk about the airline’s first year of operations.
Navigating bumps yields positive result one year ahead of forecast
Prior to taking on the role of CEO of ITA Airways, Mr Lazzerini spent three years as the Chief Business Officer of Alitalia. When asked what the transition from the old national airline to ITA and the past year had been like, Mr Lazzerini replied – “extremely challenging.” However, the airline’s reduced size also placed it in a unique position to weather yet unforeseen storms, adapting operations as new obstacles emerged. He added,
“We started up on October 15 last year with 52 aircraft. We signed the contract for those 52 aircraft with the old Alitalia, if I remember correctly, at 7 pm on October 14. It has been a year of big transformation. We initiated the process of sourcing our fleet of aircraft and starting up operations… and one month after we began operating, we started talking about Omicron. A few months later, there was the invasion of Ukraine. So it has been a challenging time. But paradoxically, the fact that we were a startup, very flexible and very small, gave us the possibility to navigate all these bumps in the market – the demand, the energy cost, tailoring capacity to need.”
And it is off to a pretty good start. The airline was one of the few in Europe not to cancel a single flight due to staff shortages over the summer. As a result, ITA is the number one airline in the world when it comes to completion factor, completing 99.9% of operations. Load factors have stabilized around 87-88%, 95% when taking business class into account.
In June, EBITDA (Earnings before interest, taxes, depreciation and amortization) figures were positive for the first time – one whole year before the ITA business plan’s forecast. This, Lazzerini says, the airline managed to do because it took over some components from Alitalia. However, the company is now undergoing a transformation to accommodate its future goals.
Fleet and configuration
ITA has already increased to a fleet of 76 aircraft, and another 72 are on the way. While its predecessor divided its graces on both sides of the Atlantic, ITA has signed an order directly with Airbus for 28 new aircraft. The airline also has agreements with Air Lease Corp (ALC) and AerCap for several other Airbus aircraft, including the A350-900.
Overall, the carrier will take 23 of the A220, 22 A320neo aircraft, 17 A330neo, and eight A350-900, of which it has already received six. By 2026, Lazzerini says, ITA Airways will have grown its fleet of aircraft to 108 aircraft. With 80% of those being the latest generation technology, it will also be “the greenest fleet” in Europe, the carrier claims.
The A220s will be mostly concentrated at Milan Linate (LIN) to operate business routes to cities across Europe. However, some will be based at Rome Fiumicino (FCO) to operate medium-range business routes that are a little thinner than those operated by the A320s. Meanwhile, the nine longer range A320neos will allow the airline to operate business travel heavy routes that do not quite warrant the deployment of a widebody to West Africa, North Africa and the Middle East. These will have eight lie-flat seats in the front of the cabin.
ITA will also reconfigure its A350 fleet, Mr Lazzerini said. In the spirit of accelerating deliveries, the airline has taken some A350s that were originally designed for other carriers. After the reconfiguration, they will have a four-class configuration, with 40 seats in business class, and the rest divided into premium economy, comfort, and standard economy. The carrier believes this configuration will be important in the post-pandemic leisure segment, where travelers will be more inclined to spend more on travel, particularly to have the luxury of more physical space on board the aircraft.
Stealing market share from Ryanair
Before its demise, debt-laden Alitalia had been fighting an increasingly losing battle against the low-cost carriers on the domestic market. In 2019, low-cost airlines received subsidies of nearly €400 million ($388 million) from smaller airports that compete for foreign travelers. ITA’s Chairman, Alfredo Altavilla, has called this practice out as unfair, saying his airline was risking “a bloodbath” if it tried to regain market shares without the same support offered the LCCs.
However, full-service ITA is off to a promising start in this arena too, challenging the belief that the low-cost model is unbeatable – particularly in Italy. Mr Lazzerini stated,
“Italy has the largest penetration of LCCs, because of the many phases of crisis of the national carrier. Alitalia went through a lot of turmoil and turbulence over the past 20 years, creating space for competition. At the same time, there was also huge investments and subsidies from the airports to bring traffic, giving incentives to the low-cost carriers. But despite the fact that this was taken as a given, how in the Italian market short- and medium-haul is for low-cost, just between Q1 and Q2, we increased our market share domestically by seven points. Those points were taken mainly from Ryanair, which lost six points, and the rest lost one point combined.”
Closing the gap to the LCCs while remaining focused on connecting passengers
And the trend seems to continue. While not yet having seen the exact data, ITA has calculated that for Q3, it has taken an additional six to seven points of market share. While the ITA CEO does not believe the low-cost model is in any way under threat, he believes that passengers are becoming more discerning with what they are paying for, and looking for more clarity on what is actually being offered. This is especially true if the rise in fuel cost will begin to bring the two business models closer to one another from a price point perspective. Then again, ITA has a slightly different mission profile compared to its budget adversaries. Mr Lazzerini stated,
“Our mission is to connect. It is not doing short-haul point-to-point. All our network is built around Linate and Fiumicino. We saw this summer that 23% of the passengers on our medium-haul routes mainly from Europe and Middle East and Northern Africa are sixth freedom passengers, meaning that they leave from one country which is not Italy, and they connect in Fiumicino to land in America.”
Employment satisfaction while saving costs?
The strikes impacting the low-cost carriers in Italy over the summer are also a factor that may have contributed to the tide shifting in the national airline’s favor. As much as 99% of ITA’s employees come from Alitalia. And while Alitalia may have had a reputation for a “lack of friendliness,” ITA has a customer satisfaction score which is 22 points higher than the average of other European full-service carriers, a result attributed to large extent to a more content crew.
This is not due to overly generous salaries, Mr Lazzarini says, but through open communication and involving every single employee in the feeling of being a startup and being “the new challenger” in the market. Career advancement within the company is also a significant contribution to employee satisfaction, he believes.
“We promoted 110 new Captains this year. This evolution of career was not possible over the last 20 years with Alitalia as it was shrinking. We are concluding the first cadet training program with 52 young generation cadets. So it’s not only the salaries – where you think you can go in your career also motivates you. And this is all part of taking care of your people.”
You may wonder why this interview does not mention one of the most significant events in ITA’s short history – its privatization. As the bidding has closed and negotiations are ongoing, the airline is not commenting publicly on the process at this stage. You can read our latest update here.