Aviation Company “Alitalia” Analysis

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Table of Contents

Introduction
News
Financial situation
Italia’s complaints for its bankruptcy
New plan to save Alitalia
Problems
Solutions
Alitalian strategies to adopt
Conclusion
Reference

Introduction

Alitalia is the flag carrier airline of Italy headquartered in Rome; it operates services to 28 domestic and 74 international destinations. The airline Hub is Leonardo da Vinci International airport, Rome. Although Malpensa international airport, Milan is currently one of Alitalis hubs. Alitalia was established on 16^th September 1946 as Aerolinee Italiane international, more commonly known as Italia, an Italian portmanteau of the words ali (wings) and Italia (Italy). It started operations on 5^th may 1947, in which year it carried over 10,000 passengers.

The inaugural flight was with a fiat G-12 Alcione, piloted by Virginio Reinero from Turin to Catania and Rome. The first international flight left a year later, travelling between Milan and cities in South America. On 31^st October 1957, Italia merged with Linee Aeree italiane and took on the name of Alitalia Linee Aeree Italiane. The Italia fleet consists of the following aircraft Boeing 777-2000ER with a total passenger of 291, Boeing 767-300ER with a passenger of 214, McDonnel Douglas MD-11, Airbus A321-100, Airbus A320-200, AirbusA319-100, McDonnell Douglas MD-82, Embraer 170, Embraer ERJ 145, ATR 72, Boeing 767-300Er, and Airbus A320-200. (Loudon and Della 1993).

News

News attempt are in the making to sell the 49.9% stake of the Italian government. On December 6^th, 2007, three parties, air France-KLM group, an investment group lead by business men and lawyer Antonio valdassare, and the Italian domestic carrier Air one presented offers to purchase Alitalia. The board of directors of Alitalia will announce winning bidder and aim to have a sale agreement in place by 2007 Christmas. Italy’s transport minister Alessandro Bianchi said in 2007 does not favour a further slippage of the ongoing privatization of the states 49.9 pct stake in Italia SPA into next year.

Financial situation

Italia has lost money for years due to labour problems and government and political interference with the attempts to solve them. it has only reported only one year of a profit since its foundation In 1946.Italia has reported net losses of more than $ 2.6 billion between 1999 and 2005.The Italia government and other organizations have invested $2.8 billion of fresh capital since 2002.Italias troubles are severe that Consob, Italy’s stock market regulator, requires it to report monthly on its debts and cash position. By the end of May 2007 had risen to $1.05 billion and net available funds had fallen to $ 466 million.

The Airline is close to facing bankruptcy if it keeps losing money at the current rate. The government may no longer offer support to the failing airline since it has been forbidden by the European union to inject new capital. Italia has several opinions like attracting fresh capital from commercial banks or the selling the stake of the Italian state or devising a way for the Italian state to inject new capital in accordance with European rules. (Brooms and Bitner, 1981).

Italia’s complaints for its bankruptcy

The company’s attitude towards its customers has sparked both testimonials and complaints. Italia filed a law suit against the website AlitaliaSucks.com in the Us Courts claiming the violation of various trademarks laws, the anticybersquatting consumer protection Act, the lanham act, and the state common law of trademark. The corporation bid to fine and silence the creators of the websites was withdrawn when public citizen, a US non-profit consumer advocacy organization stepped in to support the websites owners according to the first amendment. (Brooms and Bitner, 1981).

New plan to save Alitalia

Italia government minister Alessandro Bianchi has called for unions and Alitalia management to agree to a three month truce from striking in order to give the airline time to restructure and return to profitability after posting more disappointing figure for the past quarter.

The airline which has been struggling with industrial disputes and rising fuel prices had hoped to return to profit in 2006, but instead has been losses rise by more than 100 million euros to a record figure of EUR 221 million. The Italia government which owns 50 % of Italia is to prepare a new plan to save the carrier, and push towards implementing it in the near future. The previous two-year plan failed although the causes of this are widely agreed to be out of control of management and stem from record fuel prices. (Baker, 2000)

Problems

One of the problems that Alitalia has been faced with is lack of consumer confidence due to the fact that there have been many strikes and disturbances at the airline as staff object to the implementation of cost saving initiatives. Losses at struggling Rome based Italian carrier increased over the past three months, as a number of strikes overpay and conditions damaged confidence in the airline, and pushed costs even higher.

The Italian airline has frequent cancellations, delays, loss of luggage, overbooking, shoddy passenger treatment and dilapidated planes are regular complaints from travellers. An example is a case on august 19^th, 2007 where by a traveller claimed that she and the husband took the Italia flight to Israel and the luggage was lost. Between her and the husband, they had three pieces of luggage and two were retuned. Three weeks later she received a check from Italia and the check was less than half of what she really needed to replace the lost item and was told that Italia was not required to pay replacement costs, additional they said they paid the rate as required by international law.

Cyclical nature of the airline industry, with airline employees cycling between giving back (perhaps too much) in bad times and then, when the lower costs causes the airline to become profitable again, seeking a return to their former more generous contracts.

And if they succeed, this adds to the airline returning to chronic losses again, which means more cost cutting until the airline returns to profit and so the cycle continues. Alitalia has lost money for years due to labour problems and government and political interference with the attempts to solve them. it has only reported only one year of a profit since its foundation In 1946.Italia has reported net losses of more than $ 2.6 billion between 1999 and 2005. (Baker, 2000)

Solutions

Revolution pricing can work effectively for this company. By lowering the flight costs of different fleets, this can attract more travellers and hence as a result make more profits. Low cost airlines have grown from zero to 60 since 1994, by taking southwest’s no-frills, short-haul business model and grafting on infinitely variable pricing, aggressive savings from the contemporaneous Internet revolution and hence this can be a good initiative for this company.

Exiting news for Boeing and /or airbus. Italy has commenced discussions with the company about a huge order for large long haul type airplanes to replace its aging 747s and 767s.the first part of the order would involve replacing 20 747s and 14 767s,with more orders to follow. The board has instructed its CEO to find a partner for the loss-making airline. Few airlines are rushing to ally themselves with this chronic money looser. (Baker, 2000)

Alitalian strategies to adopt

FIAT is an Italian automobile manufacturer, engine manufacturer; financial and industrial group based in Turin, Northern Italy and was founded in 1899 by a group of investors. FIAT has marketing strategies for repositioning and re-launching the fiat brand targeting approximately 8 million new and existing customers in Europe.

The plan identifies the need for a stronger repositioning and differentiation for fiat brand and products and hence as a result, the alitalin company can adopt the marketing strategy for repositioning and re-launching the company in order to target more customers and make more profits in return The internal analysis is to be conducted considering each single aspect of the actual marketing mix and using sources such as company and competitor websites, customer forums, articles from specialized press in different European countries.

Marketing objectives is quantified by carefully studying present market shares, growth and targets. The time frame is to be conceived in such a way that the company and repositioning strategies will take place a little earlier. The logic is however that that the repositioning campaign will work as a global frame for the company. Italia has lost money for years due to labour problems and government and political interference with the attempts to solve them and hence as a result, good management should be put in place and no government should interfere with the running of the company. There is also need to corporate with the other European countries in order to be in a position to get aids in case of losses and advice. (Baker, 2000)

Conclusion

Alitalia was established on 16^th September 1946 as Aerolinee Italiane international, more commonly known as Italia, an Italian portmanteau of the words ali (wings) and Italia (Italy). It started operations on 5^th may 1947, in which year it carried over 10,000 passengers. Due to the poor management and political interference, the company has had many financial problems and it should impose strategies in order to revive it like marketing strategies and repositioning strategies in order to attract more customers. Improvement on travelling standards should be looked at in order to reduce the number of its customers going to other airlines.

Reference

Baker, J. (2000): Marketing management and strategy, 3rd edition, Macmillan business.

Brooms and Bitner, M (1981): Marketing strategies and organization structures for service firm in marketing of services. American marketing association; USA.

Loudon and Della B. (1993): Consumer behaviour, 4th edition, USA: McGraw Hill.

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