What would the Italian market look like without Alitalia?

Image: Lead Image

The recent failure to find a buyer for Alitalia means that the airline’s future is, once more, in doubt. In most other countries and in most other industries the airline would have been declared bankrupt and closed down. But even when national flag carriers ‘fail’ (Sabena and Swissair spring to mind), chances are they will re-appear sooner or later in some shape or form. This week anna.aero takes a look at the role Alitalia plays in the Italian market.

Plenty of domestic competition

Alitalia’s position domestically is far from dominant. With the exception of the UK, Italy probably has the biggest variety of carriers in any European domestic market. Frequency and capacity shares in Italy are shown below:

  Frequency share Capacity share
Alitalia (inc. Express) 36.3% 37.6%
AirOne 26.2% 23.6%
Meridiana 15.3% 16.0%
Alpi Eagles 6.2% 4.7%
Windjet 4.9% 6.9%
Ryanair 1.9% 2.7%
Volareweb 1.7% 2.4%
MyAir 1.7% 1.7%
easyJet 1.1% 1.4%
Others 4.6% 3.0%
Source: Assaeroporti, OAG Max for w/c 30 July 2007

AirOne, a privately-owned and profitable airline, already provides serious competition to Alitalia in many domestic markets. As one of the previous bidders for Alitalia, AirOne could then have a 60% share of the domestic market and a monopoly on many key routes. This is something EU regulators would, no doubt, be keen to take a closer look at.

In terms of the Top 10 domestic routes based on capacity, Alitalia really only has a monopoly on one route, between Rome FCO and Milan Malpensa. Since Rome FCO to Milan Linate is a bigger route and does have competition (from AirOne), the demise of Alitalia would only result in capacity reductions rather than the disappearance of any key routes.

Chart: Italian Top 10 Domestic Routes
Source: OAG Max Online for w/c 30 July 2007

The largest route on which Alitalia is the only current carrier is between Rome FCO and Naples, where Alitalia’s 28 weekly one-way flights represent 3,854 weekly one-way seats.

Alitalia: two-thirds of its capacity at just two airports

As with most flag carriers Alitalia’s network is focused on just a couple of key hubs, Rome Fiumicino and Milan Malpensa with over a thousand weekly departures from each. Rome absorbs 36% of Alitalia’s capacity and Milan MXP just over 30%. The only other airport with over 5% is Milan Linate with 7.4%.

In terms of airport domination Alitalia’s presence at the major Italian airports is shown below along with the leading airlines at each airport.

  Pax 2006 (m) Alitalia Share Other major Airlines’ capacity share
Rome Fiumicino 30.18 37.1% AirOne (13%)
Milan Malpensa 21.77 48.0% easyJet (9%)
Milan Linate 9.70 27.0% AirOne (24%), Meridiana (14%)
Venice 6.33 11.7% Alpi Eagles (14%), Lufthansa (8%)
Catania 5.39 21.0% Windjet (23%), Meridiana (16%)
Milan Bergamo 5.24 2.6% Ryanair (58%), MyAir (13%)
Naples 5.08 18.2% AirOne (17%), Alpi Eagles (11%)
Rome Ciampino 4.90 0.0% Ryanair (64%), easyJet (23%)
Palermo 4.28 24.6% Windjet (18%), AirOne (16%), Meridiana (12%)
Bologna 3.99 8.2% Meridiana (19%), Lufthansa (11%), AirOne (8%)
Turin 3.25 20.4% AirOne (28%), Meridiana (14%)
Pisa 3.01 6.1% Ryanair (45%), easyJet (10%)
Source: OAG Max Online for w/c 30 July 2007

Alitalia is not dominant at any of the larger regional airports having less than 25% capacity at all of them. At four of the top 12 Italian airports it has less than 10% share with no presence at all at Rome Ciampino where Ryanair is dominant.

Only 25% share of all Italian airport capacity

Examining the whole Italian market, domestic and international, shows that Alitalia is around twice a big as its nearest competitor AirOne. However, this is far less dominant than other flag carriers in other parts of Europe where there is often no realistic home-grown competitor in many markets

Chart: Top 15 Airlines at Italian Airports
Source: OAG Max Online for w/c 30 July 2007

Ryanair and easyJet rank third and fifth overall in terms of capacity share, highlighting the appeal of Italy as a destination from all across Europe, but also the fact that both LCCs have established successful bases in Italy.

Could other airlines take up the slack?

Image: AirOne
AirOne has announced plans to lease two A330-200s from International Lease Finance Corporation (ILFC). They are scheduled for delivery in February and May 2008.

AirOne’s recent announcement that it plans to acquire long-haul aircraft would enable it to take on any worthwhile parts of Alitalia’s limited long-haul network. In the short to medium-haul markets a combination of AirOne and a variety of home-grown and foreign LCCs look like they could easily provide much of the lost capacity with many of the unprofitable routes simply being dropped. Whether the Italian government will allow its national carrier to fail is another matter entirely of course.

But how much would you be willing to pay to buy Alitalia?


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