FOXTROTS

 

 

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning. 

Foxtrots – leading the industry in a dance.

 

 

2008 June 05

 

Alitalia. Down 26%!

 

I assumed Alitalia would start to lose customers after unions stopped its planned purchase by Air France-KLM. It is simple really. Even if you like the airline, if there is a reasonable alternative (price, schedule, etc), many would take it.

 

This was because unions and some staff were acting as though passengers were privileged to fly with them. And not that staff were privileged to have passengers fly with them.

 

So there have been frequent little strikes, more flights delayed than usual, and the staff were no longer happy to serve their customers.

 

Management no longer runs the airline. That has been left to the unions and staff. And they are not doing a good job.

 

Passengers have voted with their bums. January seats filled fell 6%, February 7%, and March 12%. But I was not quite ready for the shock with April data – a decline of 26%!

 

On that basis, not only is Iberia bigger (Air France, British Airways, and Lufthansa have always been bigger), but KLM and SAS overtook Alitalia in the past two years.

 

And now has Turkish. More; on current statistical trends, little Swiss will be bigger than the airline of its mighty Italian neighbour before this year is out!

 

In normal circumstances, Alitalia would be shut down in the next few days. It will not have enough cash to buy fuel for its planes, food for its passengers, salaries for its staff, and so on. Most suppliers of goods and services will demand cash from Alitalia, and it will not have the money to pay. And so there will be a continuing downward spiral.

 

The unions do not care. The staff do not seem to be bothered either. Presumably both believe that in the end, the government will bail them out.

 

And it probably will, even if it ‘cannot’ under competition rules of the European Union. The government will evoke emergency measures, and fund the continuing operation. In the meantime, it will help a buyer foolish enough to still want to buy Alitalia – either with money or with some sort of support agreement. Again, the fact that this would be illegal under EU rules will not matter.

 

But what happens then? The unions will not get nicer or become more sensible. They will assume that the state has backed their blocking actions once, and so can be counted on to do the same in the future.

 

Meanwhile, passengers will probably continue to stay away, ergo traffic will continue to fall. Until it reaches a core level – half its size in 2007? After that, it can start to build again.

 

I cannot see the government ‘doing-a-sabena’ and letting it shut down.

 

The Fox