The successor to bankrupt Italian flag-carrier Alitalia SpA faces an uphill battle to establish itself after low-cost rivals took advantage of the pandemic and a long restructuring process to grab chunks of its home market.
Italia Trasporto Aereo SpA, known as ITA, plans to start services on October 15, after months of talks with European Commission officials over terms of the overhaul and aid previously granted to Alitalia finally produced a deal.
With those issues resolved, the company is set to kick off with mainly European flights and a handful of long-haul routes from Rome and Milan to New York, Boston, Tokyo and Miami. The goal is to build a leaner carrier that can focus mainly on international markets, without getting bogged down by the costs and commitments that made Alitalia a ward of the government since 2017.
But ITA, at half the size of the old Alitalia, may be too small to compete against established airlines with only seven wide-body planes, and is lacking a partner after years of talks with major carriers including Deutsche Lufthansa AG and Delta Air Lines Inc. Long-haul travel also remains hobbled by widespread border curbs, and the corporate demand that’s usually a key driver for inter-continental journeys is expected to take years to fully revive after the pandemic.
In the short-haul markets that are rushing back, lower-cost rivals led by Ryanair Holdings Plc and fast-expanding Wizz Air Holdings Plc have moved into Italy during the pandemic while the government haggled with Brussels over what Alitalia assets could be handed over to state-owned ITA. “Uncertainties are very high in long-haul markets,” said Andrea Giuricin, transportation economist at the University of Milano-Bicocca. And ITA “will hardly will have costs as low as Wizz or Ryanair.”
Ryanair, Europe’s largest discount airline, now controls 33% of the Italian market, up from 22% in mid-2019, based on data from flight-tracking firm OAG.
State-owned Alitalia was the dominant local presence in Italy for decades. A bloated workforce, an aging fleet and inefficient operating model saddled it with high costs.