Three reasons why Etihad’s tie-up with Alitalia can fly
There is no better way to assess a big change than by looking at it from outside the process.
Being personally involved in the Alitalia-Etihad negotiations held in Rome a few weeks ago, my team and I had to take a step back, consider the problem in theory and ask ourselves if it was going to work before signing any document.
In fact, I became convinced that there was no better solution, for three simple reasons.
Alitalia was about to go bankrupt, again. There was no easy solution. Money was necessary, but money is not about everything and, first of all, there was the strong need for an idea.
The idea is a project for the future.
The equity alliance scheme, brought into the aviation world by Etihad a few years ago, is innovative and ambitious.
Should it be successful, it is going to drive the biggest change in the aviation world in the next 20 years. Added value, for Alitalia, is the fact that in the past five years, since the 2009 privatisation of the airline, it never saw an ambitious industrial plan that addressed the next 10 to 15 years, but just short-sighted blueprints possibly able to limit damages and maintain the status quo – obviously not enough to run an airline at present. So the chance to evaluate a long- term project was the first and most important factor to start with.
If you have a plan, you need resources to realise it.
The second good reason to believe the deal will lead to success is the economic strength that Etihad will put in the business. Obviously, being the minority stakeholder, it will not be asked to provide all the necessary economic resources, but only what is due. On the other hand, if I was representing the majority investor, I would feel much better knowing that my partner has the money, the experience and an excellent management team with very clear projects in mind, something that was possibly missing from Alitalia’s top management in the last years.
Money, at first, will be necessary to turn around the airline, with a break-even target of 2017. To follow an ambitious project you need to work hard but be comfortable, without the constant and scary pressure that an extremely tight financial situation would obviously create.
Third, Italy is quite a complicated country to understand, not only for foreigners but also for natives.
Alitalia has been owned by the state for decades and, after privatisation in 2009, it has been run by private investors with complicated connections with the politicians.
In Italy, any time an industrial issue arises for Alitalia, media pressure builds on politicians and on the Alitalia top managers. That is because Alitalia always has been considered a national flag carrier rather than a company allowed to do its own business. Alitalia has been “obliged” to make choices, such as transferring its hub to Milan from Rome in 1998, that have proven to be negative and to cause unbearable financial losses.
How is this going to change after the deal with Etihad? My opinion is that Etihad, as an outsider, will be less subject to pressure from politicians. It will be able to stay separate and concentrate on internal issues, so that when problems will arise, or old problems are being handled, the confrontation will be fair and the outcome will be only in the interest of the employees and the company itself.
Maybe this is the biggest change that Alitalia workers expect from this deal, possibly the one that really will help the airline to fly high again.
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Published: November 17, 2014 04:00 AM