Oliver Wyman leading the business plan for new Alitalia

27 November 2020 Consultancy.eu

State-run airline carrier Italia Trasporto Aereo (ITA) is now operational, although most will be more familiar with its previous avatar – Alitalia. Oliver Wyman has been tasked with developing a business plan for the airline. 

Having formally registered at the end of October, ITA held its first board meeting last week, starting the clock on a 30-day deadline to submit a business plan to the Italian Transport Commission. With its dedicated aviation expertise, Oliver Wyman has been charged with developing this business strategy, which spans everything from fleet size to workforce.

Reports suggest that a downsizing plan is in the works, which would shrink the fleet from more than 90 aircraft to 75, and the staff from its current size of 11,000 to 7,000 employees. There is some financial room to work with as well – ITA starts out with €20 million in operating capital, with billions more expected to be banked in government support.

Oliver Wyman leading the business plan for new Alitalia

The airline is set to benefit from ‘Rilancio’ – a decree passed by Italian Prime Minister Giuseppe Conte in May this year as a support system for Italian businesses. Among several changes to labour, tax and state aid laws, Rilancio makes provisions for financial liquidity that will suit ITA’s cause.

All these circumstances considered, the goal is to present a viable business strategy to start with, and it’s up to Oliver Wyman and ITA leadership to strike the right balance for the company’s future.

A brief history

This is a particularly hard task considering Alitalia’s past – an extended saga of financial trouble and rescue operations. Following two decades of losses – a total of nearly €4 billion – the state-run airline was privatised in 2008, which proved unsuccessful in reversing its fortunes. In 2017, Alitalia was placed under state-appointed administrators tasked with finding new buyers.

This March, following the devastation wrought by Covid-19 on the aviation industry, the government gave up on the idea of selling the Italian flag carrier, and decided to bring it back under state control. This process has now culminated in ITA’s registration and first board meeting, which also formalised the appointment of new senior leadership.

The journey ahead 

Alitalia Chief Business Officer since 2017 Fabio Maria Lazzerini has been elevated to CEO, while former McKinsey & Company consultant, Vice Chairman at Lehman Brothers and CEO at Italian Post Francesco Caio has been named Chairman. “We have now entered the operative phase of ITA, with the ambitious goal of creating a successful airline for the country,” said Lazzerini at the board meeting.

As mentioned, there are abundant funds available to help meet this goal. That being said there are still a number of regulatory hurdles to cross in the immediate term regarding the redistribution of Alitalia assets, before any state funding can be accessed. For one, Oliver Wyman’s business strategy is subject to approval by Italy’s Transport Commission.

Following this, there are European Commission stipulations to meet regarding business continuity between Alitalia’s previous avatar and ITA. To meet the legal requirements for state aid, ITA will have to acquire Alitalia’s logo, flight & ticketing codes, frequent flier programme – MilleMiglia – and the airline’s 60 plus slots at London Heathrow airport. Together, these assets reportedly amount to a total value of €220 million. Some of these assets – flight & ticketing codes for instance – will bring implicit losses, as millions of euros remain to be returned for tickets booked before Covid-19 emerged.

Topping this off, ITA is also required to acquire Air Operator Certificates (AOC) – approvals granted by a national aviation authority for the commercial use of aircraft – from Alitalia and its regional subsidiary CityLiner. Once clear past all these regulations, ITA will prepare for a fresh start under new leadership and a revamped business plan.