How Air Italy went into Liquation

How did Air Italy go into liquidation after only two years? Rapid expansion and spending did not permit the airline to expand at the pace that Qatar Airways liked to see.

Alitalia is under restructuring. Air Italy, however, was never given a chance of restructuring.

Qatar launches as Air Italy (video)

Qatar initially launched Air Italy with great fanfare 2018. Qatar/YouTube.

Qatar decides to steer away from Italian aviation altogether

For Air Italy, this week will be the final week for those flying under Italy’s second-largest airline. However, a report from the Italian Associated Press Agency (ANSA) services between the island of Sardinia and the Italian mainland will continue beyond the week.

Qatar as a minority owner was “no longer interested in investing in Air Italy or in any other air transport project in Italy,” the Qatari airline said in a statement.

If Air Italy is in Liquidation how can they continue?

Air services will continue but with contracted crews and with rented aircraft. This won’t even compare with the level of service if the service had been continued in-house.

The dreams of Qatar fail to launch with Air Italy

Starting with the fusion of two airlines, Meridiana (based in Sardinia) and a smaller Air Italy (based in Milan), came hopes of replacing a struggling Alitalia to become the national airline that never was (due to costs).

Qatar was a minority stakeholder with a 49% stake on the carrier, Alisarda (as majority owner) had a 51% stake.

They were able to restructure a plan in which fleet modernization was in their vision. Procuring aircraft from Qatar Airways counted for a fleet expansion from 11 aircraft in 2018 to 50 by 2022.

It would have reversed the decline during the year of Meridiana and for the new airline to carry its first 10 million passengers by 2022.

The rapid expansion put the airline in the number two position

For Air Italy (it was Italy’s second-largest airline behind Alitalia) 2/3 of its traffic was domestic.

That meant the airline was still a toddler starting to walk.

However, it came at a cost

Close to 74% of Air Italy’s routes faced competition on its summer schedule. Its winter schedule carried a 100% competition factor.

There isn’t an airline or a business that doesn’t face competition.

But Air Italy’s market share was lost by half. Plus, the 737 Boeing Max was supposed to be the airline’s way to expand domestically. The airline then experienced financial problems.

Spending Big while its registration is Small

Having six aircraft (with four inactive) doesn’t even begin to describe the story of they were losing money.

Here is the inventory of Air Italy’s fleet

Active Aircraft

  • 4 Boeing 737-800 NG (not Max).
  • 1 Boeing 737-700 Possible Next Generation (not Max).
  • 1 Airbus A330-200.

Inactive Aircraft

  • 4 Airbus A330-200 in storage.
Air Italy aircraft fleet as of liquidation
Source: Air Italy.

The straw that broke the camel: Financials

Two years ago the airline had a loss of €164.2 million Euros.

2018 revenue was €283.8 million Euros, which was a decline of approximately 21.5% from the previous year’s (2017) revenue.

  • Last year’s expansion plan didn’t pay off either. Air Italy reported that last year’s estimated loss was about €200 million Euro.
  • 2018 was the first year that Qatar Airways invested in Italian aviation after the rebranding from the Meridiana name to Air Italy.
  • The culprit of those losses was associated with the relaunch and failure of some long haul routes, such as Mumbai, Delhi, and Bangkok.

The biggest irony?

Alitalia has been at administration (four years), which is longer than Air Italy’s entire life.

Alitalia continues on, but for Air Italy, it is the end of the road.

Final Thoughts: Authors Opinion

It will be a painful experience for Qatar to go through Air Italy’s liquidation. It’s the airline’s first failure of an airline in which it took a stake.

One never forgets the first venture, whether success or failure. It will serve Qatar as a test case for future investments of startup airlines.

Do you have any comments or questions as to how Air Italy went into liquidation? Please contact the journalist Alex Martinez Rivera here.

Featured Image: Airbus A330-202. Wikimedia Commons.

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