Here are the details of ITA, will take off with only 7 long-haul planes
The Board of Directors of ITA Spa, which met today under the chairmanship of Alfredo Altavilla, approved the outlines of the Business Plan [...]
Alitalia
The Board of Directors of ITA Spa, which met today under the chairmanship of Alfredo Altavilla, approved the outlines of the 2021-2025 Business Plan, illustrated by CEO and General Manager Fabio Lazzerini.
In this article:
The industrial project includes changes requested by the European Commission during interactions in recent months with the Italian government. In fact, on July 15, the European Commission sent a letter to the Italian institutions in which it positively assessed ITA's Business Plan, as amended following the interlocutions that took place, the sustainability of which was also confirmed by fairness opinions (MEOP Market Economy Operator Principle, a criterion that assesses whether the public shareholder behaves like a private investor) issued by independent advisors Mediobanca and Kearney.
Following the interaction between the Italian government and the European Commission, ITA's Business Plan-developed with the support of Rothschild, BCG and EY-implements the following discontinuities:
- ITA will be able to acquire through direct negotiation with Alitalia under Extraordinary Administration the assets necessary to operate the flight sector ("Aviation");
- The Alitalia brand will be sold through a public tender, announced and managed by Alitalia under Extraordinary Administration, in which ITA will participate as it considers the brand an indispensable element in the implementation of the aforementioned Plan;
- The activities included in the "Ground Handling" sector will be divested through a public tender, tendered and managed by Alitalia in Extraordinary Administration, in which ITA has the option to participate as a majority shareholder of a new company, alongside other partners. The activities included in "Maintenance" will also be divested through a public tender in which ITA has the option to participate as a minority partner of a new company, alongside other investors;
- Until these two tenders are awarded, Alitalia will be able to provide handling and maintenance services to ITA through supply contracts;
- ITA will start with a slot allocation consistent with the initial size of its fleet, retaining the 85% of slots now held by Alitalia at Milan Linate airport and the 43% of slots at Rome Fiumicino, an airport, the latter, less congested than Linate and with a greater availability of slots that can be acquired to support the growth in flights expected over the plan period;
- Unable to participate in the public bidding process that Alitalia in Extraordinary Administration will launch and manage for the sale of the assets related to its loyalty program, ITA plans to equip itself right away with a new loyalty program that is efficient, modern, customer-focused, and allows greater access to the company's and its partners' offerings.
Approval of the Plan by the Board of Directors is a prerequisite for the Shareholders' Meeting to pass a resolution on the initial capital increase of 700 million euros, thanks to which ITA will have at its disposal the financial endowment indispensable for the acquisition of the assets, as well as for the completion of the process of issuing the necessary certifications for the marketing of tickets - scheduled to begin on August 15 - and for the start of operations from October 15.
Interlocutions between Italian institutions and the European Commission have not changed the general framework of the Business Plan, which remains based on three main objectives:
- To create an efficient, innovative air carrier that becomes the benchmark in guaranteeing the country quality connectivity aimed at boosting tourism and foreign trade. A company that puts at the center of its strategy the best customer service (through a strong digitization of processes that ensure a best-in-class experience and personalized services), combined with sustainability, declined in its environmental (new green and technologically advanced aircraft, use of sustainable fuels), social (equality and inclusion for a gender less company) and governance (integration of sustainability in strategies and internal processes) aspects;
- Develop a network of alliances aimed at strengthening connectivity on the international routes most in demand in the market and securing the best commercial and industrial synergies. In particular, ITA has already initiated a beauty contest process to identify the long-term strategic partner, aware of the absolute centrality of the alliance to expand its reach, increase growth and employment prospects, and secure a profitable future;
- anchor the start-up of activities and operational structures to the reality of the current environment, thus taking into consideration that in the first year of the plan the company will still be operating in a pandemic exit phase. The company's development will be pursued gradually and prudently in order to ensure the public shareholder's efficient use of capital such that there will be a return on investment in line with the market. The plan is confirmed as structurally modular and dynamic so as to intercept with speed development opportunities resulting from a faster than expected traffic recovery.
Did you get your flight cancelled, miss your connection, land late?
You could get up to 600€ compensation per person
The following are the main aspects of the Business Plan approved today.
Fleet
At the start of its activities, ITA Will operate with a fleet of 52 aircraft including 7 wide body and 45 narrow body. Already in 2022 the fleet will grow to 78 aircraft (+26 over 2021) of which 13 wide bodies (+6 over 2021) and 65 narrow bodies (+20 over 2021). As of 2022, it is planned to start adding new generation aircraft to the fleet, which will gradually replace old technology aircraft. By the end of 2025, the fleet will grow to 105 aircraft (23 wide body and 82 narrow body), with 81 new generation aircraft (equal to 77% of the total fleet) that will significantly reduce environmental impact and optimize efficiency and quality of supply.
ITA planned over the plan period to converge on a single strategic partner for aircraft, so as to eliminate the complexity and inefficiencies of operating a fleet composed of aircraft from different manufacturers. Discussions are underway with key partners with the goal of rapidly converting the fleet ITA will inherit from Alitalia to a new generation of more environmentally-friendly aircraft.
Staff
ITA will start its operations in 2021 with a number of employees, hired to run the "Aviation" business, of 2,750-2,950, rising to 5,550-5,700 by the end of the plan (2025). All people will be hired under a new labor contract to ensure greater competitiveness and flexibility in comparison with others in the industry.
Should ITA win the tenders issued by Alitalia under Extraordinary Administration related to "Ground Handling" and "Maintenance" activities, it is expected at the conclusion of the plan (2025) to employ up to 2,650-2,700 resources for the "Ground Handling" part and 1,100-1,250 resources in the area pertaining to maintenance.
Network
ITA's startup operations will be mostly concentrated on routes chosen on the basis of their profitability, plus a select number of routes that, although not immediately profitable, are considered investments to ensure a sustainable presence in the medium term in markets of interest to the country.
ITA will focus its business on Fiumicino hub and Milan Linate airport, where it will position itself as the airline of choice for business and leisure traffic.
At the start of operations, the company will serve 45 destinations with 61 routes rising to 74 destinations and 89 routes in 2025, concluding the process of rebalancing flights to the long-haul sector that aims to close the country's connectivity gap.
On the long-haul network, in the IATA Winter 2021 season ITA will operate connections to New York (from Rome and Milan), Tokyo Haneda, Boston, and Miami (all three from Rome), but as early as the IATA Summer 2022 season the airline plans to start new flights to Sao Paulo, Buenos Aires, Washington, and Los Angeles.
On the short- and medium-haul network ITA plans to operate on departure connections from Fiumicino and Linate to major European destinations (including Paris, London, Amsterdam, Brussels, Frankfurt, and Geneva, with plans to further increase the number of destinations and frequencies as early as the IATA Summer 2022 season). Numerous other international routes served from Rome are also added (including, for example, those to Madrid, Athens Tel Aviv, Cairo, Tunis and Algiers).
On the domestic network, ITA will provide extensive coverage of domestic airports, serving 21 airports in the country with stable flight operations and a number of frequencies and schedules that best meet the needs of business and leisure customers.
Business strategy
The sales strategy is designed on an omni-channel business model that ensures the best possible balance between direct and indirect sales channels, in order to ensure that the customer is able to purchase through the preferred channels and the company is able to apply and develop the most efficient distribution technologies available on the market. At the same time, the strategy will take into account the different needs of the target segments, corporate and leisure, and the different traffic recovery estimated for the two segments.
Customer centricity, a founding element of the company's strategy, will be pursued through:
- processes and digital platforms that ensure a best-in-class experience at all stages of customer-company interaction, from inspiration to post-flight services;
- Customized services based on the client's needs and preferences;
- Better accessibility and simplification of processes;
- differentiated offerings from those of low-cost carriers;
- Premium services that will enrich the travel experience.
Special attention is also being paid to the development of ancillary services that, on the one hand, allow for a more granular and personalized offering to the customer and, on the other hand, seize the opportunity to generate complementary revenues to the flight activity.
Sustainability
One of the key pillars of the Business Plan is sustainability, to be pursued through the implementation of ambitious ESG goals that will enable ITA to be Europe's greenest, gender-less, and meritocratic company. In this regard, ITA will implement a series of actions to achieve these goals, broken down as follows:
- in terms of reducing environmental impact ITA will operate a gradual renewal of the fleet, which by the end of the plan (2025) will consist for the 77% of new generation aircraft, more modern, efficient, comfortable and with lower CO2 emissions, and is already in contact with primary national and international stakeholders to introduce as soon as possible in its operating standards the use of sustainable fuels (Sustainable Aviation Fuel). In addition, the use of compostable materials will be provided on board the aircraft in addition to separate waste collection;
- the company will invest in human capital through training and development programs and promote the creation of an inclusive culture with reference to disability, gender, ethnicity, sexual orientation, religion, and socio-economic status, giving preference to partners and suppliers who promote the same values;
- with reference to ITA's governance, sustainability will be integrated into internal strategies and processes through the establishment of a binding code of conduct for both employees and suppliers and partners, as well as performance targets and related incentives linked not only to economic but also to sustainability results.
Digitization
A further foundational element of ITA's business plan is the digitization of business processes, which the company will carry out through investments in digital systems and platforms to ensure a quality travel experience for customers as a distinctive element of its offerings, and to develop a flexible and streamlined organization whose foundations rest on the analysis and understanding of data and the value of its human capital, which works in an agile mode to respond quickly to the needs of its customers, enriching and developing its skills.
Economic forecasts
The Business Plan was approved providing for a Turnover to reach 3,329 million euros in 2025, with an economic result (EBIT) of 209 million euros and an Operational break-even to be achieved by the 3rd quarter of 2023.
The strategic role of ITA
ITA wants to make a strategic contribution to strengthening the national economic fabric by assuming a multiplier role for the Italian economy through wealth creation for the country and the development of synergies both with other Italian air carriers, to ensure greater coverage of the territory, and with primary national partners for the provision of goods and services instrumental to air transport. In this context, a key role will hopefully have to be reserved for the full implementation of train-to-air intermodality, which will modernize the country, improve connectivity and contribute to the reduction of harmful emissions.
ITA has already initiated interlocutions with various strategic partners for the realization of the Plan's objectives and counts on the positive cooperation of the relevant institutions and authorities in order to ensure the proper implementation of the Business Plan and the enhancement of public investment.
The chairman, Alfredo Altavilla, said, "The approval of ITA's business plan by the European Commission and the confirmation of compliance with the MEOP, which certifies the goodness of the project in a logic of private investment by the public shareholder, is an important achievement that paves the way for ITA's departure. Now in 90 days we should complete the transition to the take-off of the first aircraft on October 15. I would like to express my heartfelt thanks to the Italian government and our representation in Brussels for a team effort that made it possible to reach an important result after months of negotiations and which we trust will continue in the months to come.
CEO and MD, Fabio Lazzerini, said, "I am particularly pleased with the recognition of the industrial and financial soundness that underlie the approval of the Plan. A project that, starting from the customer and his needs, will project ITA among the best companies in Europe for economic, social and environmental sustainability, while guaranteeing connectivity to businesses, tourists and citizens. I want to express my sincere thanks to the ITA team for the enthusiastic and total commitment with which they have worked during these complex months, and to the institutions and stakeholders in the sector (ENAC, ENAV, the airport system) for the openness and trust they are showing us. Now opens the great challenge of getting a successful company off the ground in three months. A challenge to which we will devote every energy."
