ALITALIA GROUP: RESULTS FOR QUARTER THREE 2012
The Board of Directors of Alitalia - Compagnia Aerea Italiana S.p.A., chaired by Mr. Roberto Colaninno, met today in Rome and examined the Group’s consolidated financial results at 30 September 2012, which were illustrated by the CEO Andrea Ragnetti.
A TREND REVERSAL VS. FIRST HALF 2012
“The macroeconomic scenario for 2012 continues to be exceptionally challenging and demanding for Alitalia. No doubt, such factors as a cost of oil at historic peaks and the recession affecting Europe, and Italy in particular, further compound the Airline’s work. However, the positive results of this quarter buck the trend of the early 6 months of 2012. This reflects the great deal of work done and gives me and the other shareholders confidence for the future. It is a year of great sacrifices, but I am convinced that Alitalia can and will make it” – declared Alitalia’s President Roberto Colaninno.
“The early signs of our reaction to a very severe crisis are now visible. Alitalia’s results in quarter three show a trend reversal compared to the early six months of the year” – declared Andrea Ragnetti, Alitalia’s Chief Executive Officer.“These signs are more than welcome by myself and my management team as we have now gained more strength to cope with the last three months of 2012. We know that quarter four will be very difficult since, as normally happens, it will not benefit from the traffic increase due to the typical seasonality of Q3. However, we will work unswervingly for Q4 to be a record quarter in Alitalia’s history, the best fourth quarter in the last 20 years.”
PERFORMANCE OF THE ALITALIA GROUP IN THE THIRD QUARTER 2012
In Q3 2012, despite the persistence of a macroeconomic situation that was still extremely negative, the Alitalia Group’s financial performance – i.e. EBIT and net result in particular – bucked the trend of the first half of 2012.
Total revenues for the period increased from 1,080 M€ in Q3 2011 to 1,126 M€ of 2012 (+ 4%).
EBIT was equal to + 50 M€ (vs. + 90 M€ in 2011), significantly above the level recorded in the second quarter of 2012 of - 60 M€.
The net result for the quarter was a profit of 27 M€ (vs. + 69 M€ in 2011), significantly above the level recorded in the second quarter of 2012 of - 70 M€.
On 30 September, net financial indebtedness was equal to 923 M€, i.e. up 61 M€ from 30 June 2012 (862 M€), of which the owned-fleet indebtedness share amounted to 648 M€.
At the end of the quarter, total liquidity – including unused credit lines – amounted to 300 M€, or down 67 M€ from the level of 30 June 2012 (367 M€).
The interim result for the period from January to September 2012 shows net loss down from -201 M€ of first half 2012 to the current -173 M€ and operating result having evolved from -169 M€ of first half to the current -119 M€.
In the quarter ended on 30 September 2012, the Alitalia Group transported nearly 7 million 500 thousand passengers, i.e. substantially the same figure as that recorded in the same period of 2011.
In the period considered, the Alitalia Group market share remained stable at about 23% on the three flight segments in aggregate, i.e. intercontinental, international and domestic.
Alitalia’s load factor achieved 78%, i.e. up 0.5 percentage points from the level recorded in the same period of 2011 (77.5%).
THE INDUSTRIAL PLAN FOR 2013-2015
In course of the Board of Directors Meeting, the basic elements of the Industrial Plan for 2013-2015 of the Alitalia Group were outlined. The Plan will be based on two major drivers: control of costs for financing growth, and revenue development.
The Group’s objective is to achieve operating profit at the end of 2013.
Control of costs, as a key element of the “Earn to Invest” programme of the Group, will mainly rely – i.e. to the extent of 80% - on commercial and industrial partnerships developed alongside air transport. These partnerships will generate further resources – designed to finance growth – and revenue development in the Group’s core business.
Costs will also be contained through a corporate reorganisation project and the innovation and reengineering of the Group’s processes and business model as well as through the additional opportunities now offered by the synergism achieved in the alliances with the Air France - KLM Group and with Delta Airlines.
For revenues to increase, the innovative strategies to be initiated will focus on the network, revenue management and the marketing of new demand-driving products:
- the network will expand by keeping the number of aircraft in the fleet unchanged but increasing the time of their utilisation, specifically in winter, in the middle of the day and at night time in summer. This will meet the demand for new direct links in Italy as well as for links to Italy from the emerging markets in particular;
- the Alitalia Group will continue its policy for the transparency and simplification of its fare structure, as already innovatively applied on the Rome – Milan – Rome route;
- marketing terms will evolve through the development of new sales channels – 17 new potential routes were identified for a launch planned in 2013;
- more investments will be made on products and services, with a clear focus on excellence, which will go hand in hand with communication activities to promote the Alitalia brand both in Italy and worldwide.
OUTLOOK FOR THE NEXT FEW MONTHS
The outlook for quarter four confirms the strong slowdown of demand ascribable to the uncertainties of the global economic and financial scenario, as well as the persistence of high oil-price and euro/dollar exchange-rate levels, which will strongly impact on the costs of the Alitalia Group.
However, Alitalia’s commitment to revenue growth will continue in Q4 not only through cost-containment measures, but also, and more importantly, through development-driven commercial policies and significant investments to start operating flights towards new destinations between late 2012 and early 2013, i.e. Abu Dhabi (United Arab Emirates), Zurich (Switzerland), Yerevan (Armenia), Prague (Czech Republic) and Fortaleza (Brazil).
Through this strategy, the Alitalia Group aims at a record result in Q4 with the ultimate purpose of closing the year with a trend reversal vs. the first half of 2012. It should be noted that in Alitalia’s history, Q4 has never closed with a positive EBIT, and the best result in the last 20 years has been the 2009 level of -15 million. Last year, the fourth quarter closed at -27.
OPERATIONAL PERFORMANCE AND FLEET RENEWAL
In operational terms, Alitalia’s service levels progressed in the quarter under review. More specifically, flight regularity increased to 99.9%, i.e. up 0.2 percentage points from the level of Q3 2011.
Flight punctuality reached 83.8% inthe period, or up 1.9 points from 81.9% of the period July to September 2011.
Alitalia continues to rank among the top airlines in the world for the punctuality of its flights, with values well above those of the other Members of the AEA (Association of European Airlines). The Airline is now focusing on a further improvement of its operational performance so as to achieve its target for 2013 of becoming the most punctual carrier in Europe.
In the third quarter of 2012, the Group’s fleet renewal continued with the phase-in of 5 new aircraft, of which 1 Airbus A330 and 4 Embraer E-175s. Since the beginning of 2012, 19 long-haul aircraft (Airbus A330s) and short-haul aircraft (Airbus A319s, Embraer E-190s and E-175s) have entered the Alitalia fleet.
In quarter three, 11 aircraft were phased out, on a total of 31 aircraft removed from the Group’s operating fleet since the year start. At 30 December, Alitalia’s operating fleet included 147 aircraft.
Since July, through the completion of the operations for reconfiguring the cabins of the 10 long-haul Boeing B777s, Alitalia has offered a consistently high-quality in-flight service in almost its full long-haul network – divided into the 3 travel classes of Magnifica (business), Classica Plus (premium economy) and Classica (economy).
Alitalia’s fleet renewal process will continue throughout the year with the phase out of MD80s (last flight scheduled on 27 October) and Boeing 767s.
By 1 Jan. 2013, Alitalia will have a fully new or renewed fleet, among the youngest (6.5 years of average lifetime) and the most efficient in the world (through a reduced number of aircraft families) with an added plus, i.e. a low impact on the environment.
MAIN INNOVATION IN THE THIRD QUARTER
In the quarter considered, the Alitalia Group inaugurated new routes. On 2 of July, Alitalia launched the Rome - Tbilisi (Georgia) route with two weekly frequencies – which has effectively met the growing demand for transport between Italy and Georgia associated with the increased economic cooperation, cultural exchanges and trade between the two countries.
Air One inaugurated new flights from its Milan Malpensa Base to Kiev (17 September) and Belgrade (18 September); from its Venice base, a new flight to Brussels was inaugurated on 10 September. These new routes have expanded the point-to-point network of Air One’s bases thereby improving its flight offer at extremely advantageous prices with no compromise on quality, safety, reliability and customer care.
Given the growing demand for holiday traffic for this period of the year, between July and September, the Alitalia Group also started numerous seasonal flights under both the Alitalia and the Air One brands to the main tourist destinations in Italy and the Mediterranean Basin.
Since 16 July, Alitalia has changed the rules of air transport on the Rome – Milan – Rome route, and fully renewed the service offered on this route. Concurrently, it has fully revised its pricing by making fares simpler and more transparent. The 44 fares formerly available for this route have been permanently replaced by only 5 travel solutions at fixed prices expressly determined to compete with the train, from 99 euros per route up. This fare revolution has been promoted by an aggressive communication and marketing campaign, which will continue in the months ahead.
On 12 August, when WindJet suspended operations, Alitalia started a number of rerouting actions to help passengers who could no longer fly. Between 13 August and 18 September, more than 60,000 people holding a WindJet ticket were rerouted to Alitalia special and scheduled flights. More than 350 special flights were operated at night time, with dedicated fares granted up to the latest available seat. To meet customers’ requests for assistance, Alitalia established a dedicated call centre which replied, on average, to 2,000 calls per day. During this emergency situation of the domestic air transport, the full personnel of the Alitalia Group (both ground staff and crews) did their utmost to alleviate the inconvenience to WindJet customers.
Between the end of August and the beginning of September, Alitalia announced that tickets for flights from the Rome Fiumicino hub had been put on sale to the new destinations of Abu Dhabi, to be operated from 1 December, and Zurich, to be operated from 29 October.