Skift Take
For the world’s weakest airlines, the current crisis brings a new lease on life. The pandemic's fallout has turned what were dead-end business models into models with a much greater chance of success.
“We’re sure glad 2019 is over. 2020 has been so much better.”
This is a quote said by absolutely nobody in the airline industry (passenger airlines, anyway). Nobody will disagree that the 2020 Covid-19 pandemic is the worst crisis the sector has ever faced. Nobody can make money when revenues are essentially zero. Nobody likes depression-like economic conditions.
True, but …
For the airline industry’s sickest patients — the uncompetitive, the undercapitalized, the strategically challenged — the ravages of 2020 are in some respects a blessing. For one, the crisis has opened a gusher of government financial support: Grants, credit support, tax relief, regulatory relaxation, and so on. If you’re Delta or IAG or Singapore Airlines, that’s aid you wished you never had to take, aid that will taint sterling balance sheets and dilute shareholders. If you’re Alitalia, though, that aid represents a new lease on life, aid that would never have come had there been no crisis.
Alitalia, remember, was searching for survival capital throughout 2019, from Delta, from easyJet, from Lufthansa, from private equity firms, from the Italian Treasury, from Italian conglomerates, and just about anyone else who’d listen. Alas, it got nowhere, and there was a real chance the money-bleeding airline would finally collapse. Until Covid-19 came along.
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Alitalia now stands to be relaunched with a massive $3.3 billion in government subsidies. The carrier, which lost more than $500 million last year, and another $240 million in the first quarter of this year, will downsize but not much, aiming for a fleet of 92 planes, including 20 wide-bodies for intercontinental routes. The relaunch effort might also include changes to labor laws that disadvantage the foreign low-cost carriers that carry the majority of Italy’s air traffic. In fact, Ryanair, easyJet, Vueling, Volotea, Norwegian, and Romania’s Blue Air teamed
