Rome fire burns into Alitalia turnaround cash

Alitalia said on Tuesday it had lost €80 million euros as a result of a fire at Rome's main airport in May but insisted its recovery plan remained on track after the abrupt departure of its chief executive last month.

Rome fire burns into Alitalia turnaround cash
Post-fire problems at Rome's Fiumicino airport have been a blow to Alitalia. Photo: Photo: Gabriel Buoys/AFP

The loss-making carrier, rescued from the brink of collapse by Etihad Airways at the end of 2014, said the fire at Fiumicino airport had resulted in significant loss of revenue and additional costs which the company would be looking to reclaim.

“Our exposure from the fire is in excess of €80 million,” Etihad chief executive James Hogan said. “We are compiling our dossier and when the relevant authorities decide who was at fault we will submit our claim.”

Alitalia chairman Luca di Montezemelo stressed that the airline was not blaming the airport operator ADR for the fire that partially destroyed the biggest international terminal at Fiumicino and disrupted traffic throughout the peak summer season.

“This is something that needs to be sorted out with insurance companies,” the former Ferrari Formula One team boss said.

Di Montezemelo is acting as chief executive following the shock resignation of Silvano Cassano last month “for personal reasons”.

Hogan said a search for a replacement was underway and confirmed he was now spending one week a month in Italy overseeing a revamp of the airline's offer to customers and its financial and organisational operating systems.

It is a move industry watchers have interpreted as a sign all is not going as well as Etihad hoped when they saved the Italian company by taking a 49 percent stake and leading a restructure which eliminated its debts.

Alitalia lost €136 million in the first six months of this year but Chief Financial Officer Duncan Naysmith, one of the Etihad executives parachuted into the company, said this was slightly better than projected
under a plan to bring Alitalia to profit by 2017.

“We have been hit by the fire and by the loss of a profitable route to Venezuela but we have compensated with cost cuts and efficiencies that will bring €180 million of savings in 2015. We will deliver profitability in 2017. “

Hogan acknowledged Alitalia still had room for improvement in terms of load factor – the proportion of seats sold – and average fares.

“Phase one is done but now we have to move on to phase two right away,” he said. “The foundations are there but we are trying to build a house which takes time.”

Hogan said there had been signs of a new pricing system introduced by Etihad having a positive impact in the third quarter of the year while De Montezemelo said the load factor had reached 83 percent in the three months to the end of September.

Taking Alitalia upmarket and being able to command premium fares from the business and super rich segments of the international market are central to the Gulf carrier's strategy for the Italian group.

But it also needs to compete in the long and short haul tourist markets and these areas appear to be giving cause for concern.

Long parts of Tuesday's press conference were given over to complaints about the Italian government's failure to deliver on promises to boost promotion of Italy in countries where Alitalia operates services and about alleged preferential treatment for budget airline Ryanair at Bari airport in southern Italy.

The company announced new services from Rome to Santiago in Chile from May next year and to Mexico City from June 2016.

It also said it would be extending the provision of wi-fi facilities to its entire fleet. Passengers can currently only access the Internet on some long haul flights.

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