In the view of Alitalia’s Board Chairman, Mr. Roberto Colaninno, “despite an exceptionally challenging macroeconomic scenario, revenue growth will remain a mission for our Group in the next few years. That is why we will continue to invest in service fundamentals and fleet quality. A strong and solid national airline has a value going well beyond national pride and proves now to be a strategic economic asset for Italy as a whole”.
“In one of the worst half years in the memory of air traffic insiders, Alitalia has managed to resist – better than other European airlines did – to the most diversified adverse events, i.e. oil cost at its highest historical levels, an unprecedented appreciation of the dollar against the euro, recession in Europe and – to an even higher extent – in Italy, which all caused a dramatic shrinkage in demand” declared Andrea Ragnetti, Alitalia’s Chief Executive Officer. “In the latest quarter we worked hard to counter the crisis and prepare ourselves to speed up the pace of our revenue growth in the second half of 2012 and chiefly in 2013. We have continued to renew our fleet for it to be among the youngest in the world by January 2013; we have concentrated on a further improvement in service and operational performance with the ultimate aim of achieving the best on-time record in Europe by 2014; we have shaped our internal organisation with the objective of driving up sales and revenues. The worst part of the year is back. The second half will expectedly perform better the first. Many sacrifices will still be needed and our action will have to be cohesive and resolute; in any case, the trend reversal I expect will set us on a course towards 2013 which, as I said, is likely to bring Alitalia back to operating profit after more than twenty years”.
The early six months of 2012 were characterised by a financial crisis that beset the Euro zone and, in particular, the Mediterranean basin countries, an area whose recession is proving to be deeper and longer than feared.
The half year also saw a significant increase in the cost of fuel supplies (whose incidence on the Airline’s operating cost was 33% on average). This increase determined a period-on-period price increase of 7.4% over 2011 (up from an average oil cost of 107.6 dollars per barrel in H1 2011 to 115.1 dollars per barrels in H1 2012, with peaks of 124.5 dollars per barrel).
Another factor that negatively impacted on the Airline’s results is the 6% strengthening of the dollar against the euro (as opposed to the first half of 2011), which negatively affected not merely fuel purchases but also other costs such as lease fees on non-owned fleet and maintenance costs.
In the half-year ended on 30 June 2012, the Alitalia Group transported more than 11 million passengers, with a substantially unchanged result as opposed to the January-June 2011 period (-0.8%). In a general context of market-capacity rationalisation and in order to face a falling demand caused by the economic and financial crisis, the Alitalia Group embarked on capacity optimisation actions which resulted in an overall 3.7% reduction in offered capacity.
Alitalia’s entrance into the market of long-haul charter flights to tourist destinations in particularly high demand from Italian consumers during winter resulted in the Airline’s increase of its transported passenger volume by 195 thousand units, to be considered in addition to the more than 11 million passengers transported through scheduled flights. In the January-May period, the Alitalia Group market share was equal to 22.7% (in line with the level of the early 6 months of 2011) on the three flight segments in aggregate, i.e. intercontinental, international and domestic.
Through the introduced changes on offered capacity – made possible, inter alia, by the Airline’s fleet renewal – load factor achieved 71.1%, i.e. significantly above the 2011 level (+3.4 percentage points).
Total revenues for the period rose significantly from 1,620 to 1,686 million euros (+4.1%). The driving factors behind this result include, e.g., the development of long-haul charter operations, a strong increase in ancillary revenues, an improvement in Cargo Belly operations (whose revenues increased 6.2%), a load factor rise (+ 5 percentage points), fare adjustments to reflect increased fuel costs – in line with the Airline’s reference competitors – and a more efficient fare-class management.
Despite the demand shrinkage, the Alitalia Group inaugurated new routes during the period, in particular through the start-up of Air One Smart Carrier operations in Venice - the new third base of Airline’s network - and introduced new domestic and international flights from Milan Malpensa and Pisa.
In the first half of the year, Alitalia continued to invest in quality improvements in ground and on-board passenger services through the launch of a new Executive service for high-value customers – including an exclusive package of dedicated pre-flight and after-flight benefits.
This is indeed a flagship service in Alitalia’s offer for the most demanding clientele and an ideal companion to a travel experience in Magnifica, the intercontinental business class.
Magnifica is today a unique, top-raking class of its kind globally, where passengers find last generation full-flat seats which convert to comfortable beds, in-flight meals fully inspired by typical regional recipes (through which Alitalia won the “Best Airline Cuisine” award of the US monthly Global Traveler for two years in a row), accessories in leading Italian designers’ brands such as Richard Ginori and Frette and a Bulgari case with an exclusive Airline selection of cosmetics and products.
Through a gradual renewal of the long-haul fleet, the “Classica Plus” – a premium economy introduced by Alitalia on its intercontinental routes – is now available on flights from and to Japan, Argentina, Brazil and Venezuela.
FINANCIAL POSITION AND PERFORMANCE
Italy’s economic and financial situation and the impact of negative scenario factors as outlined above drove down the Alitalia Group’s financial performance indicators, i.e. EBIT and net result.
At -169 M €, EBIT was 101 million euros below the level of the first half of 2011, whereas net result closed at -201 ml. €, down 107 million euros from H1 2011. On 30 June, net financial indebtedness was equal to 862 million euros, up 8 M € from 31 Dec. 2011 (854 M €), with a 658 M € indebtedness share of the owned-aircraft fleet.
