Expert Q&A
Alitalia Prepares to Judge Suitors to Lead It Out of Bankruptcy
October 23, 2017
The proposal process to determine the future of Alitalia is winding down, but executives insist the carrier will not accept a marriage of desperation. New chief commercial officer Fabio Maria Lazzerini said Alitalia's financial situation has improved since it began bankruptcy proceedings this year. Saying things are "business as usual," Lazzerini spoke with BTN transportation editor Michael B. Baker about Alitalia's outlook and how the proceedings are affecting its relationships with corporate partners.
BTN: What's the status of the administration process?
Lazzerini: By Oct. 16, all the potential companies interested in Alitalia [needed] to declare themselves officially. They have until Nov. 5 to present their offers. The offers will be binding offers for the ones presenting their offers, not for Alitalia. Alitalia management along with the commissioners and the government will evaluate the offers. The preference will be for the bidders that create an offer for the entire company, not for small pieces of it. The government intends to keep the company whole, Italian and operating out of Italy and keeping the name. We then will open individual negotiations with potential bidders to improve those bids.
BTN: What's happening with operations?
Lazzerini: The company is launching its new service for the winter season. We are already planning new service for the summer season. For the first time after three years, revenues are up compared with the previous year. The first six months of the year, EBITDA was positive by €46 million. Last year was negative. We are planning to grow EBITDA. It doesn't mean we will not generate losses but much lower than the previous years. This is important for the stability of the company, despite what happens with the process. When the administration started on May 2, the government gave Alitalia a bank loan of €600 million euros, more or less, to protect the company and make sure Alitalia could continue to operate. That has not been touched yet because Alitalia managed to generate enough cash to sustain itself. That allows us to have long-term planning.
The [Italian] Civil Aviation Authority gave back to Alitalia the unlimited license to fly [after] 10 months [with] a temporary one. The commissioners have the power of reducing costs even further because they can terminate any contract at their own will. Some costs have been terminated like a contract on the fuel price, which was way negative for Alitalia. Other contracts represent further opportunity of savings. …
We are completely redoing Alitalia.com, making it much more modern and more integrated not only with the sales process but the check-in and post-sales processes.
BTN: What about with corporate business? Are you continuing to negotiate and renew contracts with corporate travel programs and travel management companies?
Lazzerini: Corporates are important. We are talking with the direct customers and can partner even better with the TMCs. We are reinforcing the team looking after the global corporate accounts, both [agency] and companies. A new VP joined to be responsible for global sales to bring back focus on this side of the business because it is the most profitable one. We need to balance [business from Italian companies], which is 45 percent of the overall revenues of Alitalia, with the relationships outside Italy.
Italy is a market where [small and midsize enterprises] are very important. Something like 95 percent of the Italian companies are below 200 employees; you cannot go for a super-corporate global agreement, but they're important. We have a program called Alitalia BusinessConnect. It's basically a program where both the company and the flyer accrue miles they can use.
BTN: Are you retaining customers, or has there been attrition?
Lazzerini: There wasn't [attrition]. There were some ups and downs, especially during February and March. Aviation with the [travel agencies] is extremely strong. Globally, very few are reducing revenues with us. Most of them are growing. We kept in extremely constant relations with the [agency] partners. It's easy to go and face a customer when everything goes well. It's not easy when you sit down in front of a customer and they ask, "Are you still there? Did you go bankrupt? Are you closing down?" But they're partners, and we need to give them all the information because then they are facing their own customers, which are our customers, as well. … We renewed completely the [agency] contracts, the commission-based incentives. We are honoring our obligations without delay.
BTN: What is the route growth you mentioned?
Lazzerini: We are launching Male [in the Maldives and] New Delhi at the end of the month, and we are operating Los Angeles for the winter season. We are planning further growth next summer, something in Africa. Potentially, we will work with [Delta through our joint venture] to see if there are other opportunities to increase frequencies or coverage of North America. We have integrated [with Delta] and are pushing to be even more integrated. I'm not saying all the problems of Alitalia have been solved. It still needs a strong partner, which can be a financial institution, an investment fund, another legacy carrier, a low-cost carrier, a European carrier. Alitalia needs to be reinforced because we need to increase our capacity to operate a long-haul network.
BTN: You had your own plan before administration began. Will your choice of which proposal to accept depend upon that?
Lazzerini: We are presenting our own plan. It doesn't mean we'll have only one partner. It could be an investment partner and another airline. We have a standalone plan, which would be with an investment fund, where the majority of the development is on long haul. We have other plans where we can mix our plan with a potential carrier that is going to invest in the company. Our goal is to increase the long-haul connectivity. That's the only way. We can still compete well with the low-cost carriers, but we cannot do only that; it can be a portion to feed our long-haul connections. The [other] component is the medium haul, the connection between Italy and European cities where EasyJet and Ryanair are working with very low fares. They have low costs, which we don't have. We could go to low fares, but then we lose money. We can [use] our network to feed the international flights and be creative in other connectivities. We have always competed with the high-speed train, but ... there can be some integration [instead].
BTN: Where else do you see future growth?
Lazzerini: We have strong connectivity with South America. North America is important, and we are working constantly with our joint-venture [partners], especially Delta, to see if we can [increase] capacity. Africa can be another good destination, given the position of Italy. Then we have the East, where we have a presence in Korea and Japan. We do not have enough good coverage in China. We are asking desperately for new slots, but it's difficult to get them. We try to find routes where we can combine leisure and business. Purely leisure destinations don't pay off enough, [though] Male is an exception.
BTN: Will you deepen partnerships with carriers in Asia?
Lazzerini: China Eastern is a partner, and Korean is a partner, as well, through SkyTeam. In China, even if we increase and open other gateways, it's impossible [to have full coverage] because it's basically a continent, so strengthening our partnerships there is crucial.
BTN: What's happening at the management level?
Lazzerini: Top management has been heavily redesigned. I joined one month ago. The head of HR joined one month ago. Head of legal joined six months ago. In the past six months, the commissioners terminated 32 of the top managers, the foreigners who came during the Etihad period, so there is some fresh air coming in. I've been the general manager of Emirates for four years. I always heard people saying that the [employees] at Alitalia are very good. It's very true. The revenues are coming in despite this situation, especially on the Italian market. One of the reasons Chapter 11 exists is to allow the company to reshape its future. You need that phase to go back to your roots and decide what you want to be.
http://www.businesstravelnews.com/I...to-Judge-Suitors-to-Lead-It-Out-of-Bankruptcy
Alitalia Prepares to Judge Suitors to Lead It Out of Bankruptcy
October 23, 2017
The proposal process to determine the future of Alitalia is winding down, but executives insist the carrier will not accept a marriage of desperation. New chief commercial officer Fabio Maria Lazzerini said Alitalia's financial situation has improved since it began bankruptcy proceedings this year. Saying things are "business as usual," Lazzerini spoke with BTN transportation editor Michael B. Baker about Alitalia's outlook and how the proceedings are affecting its relationships with corporate partners.
BTN: What's the status of the administration process?
Lazzerini: By Oct. 16, all the potential companies interested in Alitalia [needed] to declare themselves officially. They have until Nov. 5 to present their offers. The offers will be binding offers for the ones presenting their offers, not for Alitalia. Alitalia management along with the commissioners and the government will evaluate the offers. The preference will be for the bidders that create an offer for the entire company, not for small pieces of it. The government intends to keep the company whole, Italian and operating out of Italy and keeping the name. We then will open individual negotiations with potential bidders to improve those bids.
BTN: What's happening with operations?
Lazzerini: The company is launching its new service for the winter season. We are already planning new service for the summer season. For the first time after three years, revenues are up compared with the previous year. The first six months of the year, EBITDA was positive by €46 million. Last year was negative. We are planning to grow EBITDA. It doesn't mean we will not generate losses but much lower than the previous years. This is important for the stability of the company, despite what happens with the process. When the administration started on May 2, the government gave Alitalia a bank loan of €600 million euros, more or less, to protect the company and make sure Alitalia could continue to operate. That has not been touched yet because Alitalia managed to generate enough cash to sustain itself. That allows us to have long-term planning.
The [Italian] Civil Aviation Authority gave back to Alitalia the unlimited license to fly [after] 10 months [with] a temporary one. The commissioners have the power of reducing costs even further because they can terminate any contract at their own will. Some costs have been terminated like a contract on the fuel price, which was way negative for Alitalia. Other contracts represent further opportunity of savings. …
We are completely redoing Alitalia.com, making it much more modern and more integrated not only with the sales process but the check-in and post-sales processes.
BTN: What about with corporate business? Are you continuing to negotiate and renew contracts with corporate travel programs and travel management companies?
Lazzerini: Corporates are important. We are talking with the direct customers and can partner even better with the TMCs. We are reinforcing the team looking after the global corporate accounts, both [agency] and companies. A new VP joined to be responsible for global sales to bring back focus on this side of the business because it is the most profitable one. We need to balance [business from Italian companies], which is 45 percent of the overall revenues of Alitalia, with the relationships outside Italy.
Italy is a market where [small and midsize enterprises] are very important. Something like 95 percent of the Italian companies are below 200 employees; you cannot go for a super-corporate global agreement, but they're important. We have a program called Alitalia BusinessConnect. It's basically a program where both the company and the flyer accrue miles they can use.
BTN: Are you retaining customers, or has there been attrition?
Lazzerini: There wasn't [attrition]. There were some ups and downs, especially during February and March. Aviation with the [travel agencies] is extremely strong. Globally, very few are reducing revenues with us. Most of them are growing. We kept in extremely constant relations with the [agency] partners. It's easy to go and face a customer when everything goes well. It's not easy when you sit down in front of a customer and they ask, "Are you still there? Did you go bankrupt? Are you closing down?" But they're partners, and we need to give them all the information because then they are facing their own customers, which are our customers, as well. … We renewed completely the [agency] contracts, the commission-based incentives. We are honoring our obligations without delay.
BTN: What is the route growth you mentioned?
Lazzerini: We are launching Male [in the Maldives and] New Delhi at the end of the month, and we are operating Los Angeles for the winter season. We are planning further growth next summer, something in Africa. Potentially, we will work with [Delta through our joint venture] to see if there are other opportunities to increase frequencies or coverage of North America. We have integrated [with Delta] and are pushing to be even more integrated. I'm not saying all the problems of Alitalia have been solved. It still needs a strong partner, which can be a financial institution, an investment fund, another legacy carrier, a low-cost carrier, a European carrier. Alitalia needs to be reinforced because we need to increase our capacity to operate a long-haul network.
BTN: You had your own plan before administration began. Will your choice of which proposal to accept depend upon that?
Lazzerini: We are presenting our own plan. It doesn't mean we'll have only one partner. It could be an investment partner and another airline. We have a standalone plan, which would be with an investment fund, where the majority of the development is on long haul. We have other plans where we can mix our plan with a potential carrier that is going to invest in the company. Our goal is to increase the long-haul connectivity. That's the only way. We can still compete well with the low-cost carriers, but we cannot do only that; it can be a portion to feed our long-haul connections. The [other] component is the medium haul, the connection between Italy and European cities where EasyJet and Ryanair are working with very low fares. They have low costs, which we don't have. We could go to low fares, but then we lose money. We can [use] our network to feed the international flights and be creative in other connectivities. We have always competed with the high-speed train, but ... there can be some integration [instead].
BTN: Where else do you see future growth?
Lazzerini: We have strong connectivity with South America. North America is important, and we are working constantly with our joint-venture [partners], especially Delta, to see if we can [increase] capacity. Africa can be another good destination, given the position of Italy. Then we have the East, where we have a presence in Korea and Japan. We do not have enough good coverage in China. We are asking desperately for new slots, but it's difficult to get them. We try to find routes where we can combine leisure and business. Purely leisure destinations don't pay off enough, [though] Male is an exception.
BTN: Will you deepen partnerships with carriers in Asia?
Lazzerini: China Eastern is a partner, and Korean is a partner, as well, through SkyTeam. In China, even if we increase and open other gateways, it's impossible [to have full coverage] because it's basically a continent, so strengthening our partnerships there is crucial.
BTN: What's happening at the management level?
Lazzerini: Top management has been heavily redesigned. I joined one month ago. The head of HR joined one month ago. Head of legal joined six months ago. In the past six months, the commissioners terminated 32 of the top managers, the foreigners who came during the Etihad period, so there is some fresh air coming in. I've been the general manager of Emirates for four years. I always heard people saying that the [employees] at Alitalia are very good. It's very true. The revenues are coming in despite this situation, especially on the Italian market. One of the reasons Chapter 11 exists is to allow the company to reshape its future. You need that phase to go back to your roots and decide what you want to be.
http://www.businesstravelnews.com/I...to-Judge-Suitors-to-Lead-It-Out-of-Bankruptcy
