An analysis of air market trends in Europe. The Alitalia paradox: any solution?

An analysis of air market trends in Europe. The Alitalia paradox: any solution?

Title

An analysis of air market trends in Europe. The Alitalia paradox: any solution?

Author

Riccardo Toso

Abstract

The following study wants to analyse the economic and managerial causes which have affected Italian carrier, Alitalia, in the last years. From the niche literature, some further evidence on its economic impact is provided: why the air market development in Italy is limited and how this company is still unable to detect and to react to the new market trends properly. Starting from an analysis of the air transport market in Italy and Europe, the paper examines the most recent trends in the transport sector, especially phenomena linked with low cost carriers and high speed rails.
The consequence of European liberalization in the air market has led not only to a remarkable increase in air demand, mostly thanks to low cost competitors which follow a cost leadership strategy, but also in those carried by high-speed trains. Within this background, the increase in travellers follows a cost reduction in fares, affected by the level of competitiveness, determining which shall be the key factors for a competitive advantage. While most of the Alitalia’s competitors have progressively adapted their business models to new emerging market needs, others met some obstacles. Thus, an analysis of peculiar carachteristics is provided. Through success examples, airline’s winning factors will be explained as a combination of variables such as a more efficient long-haul fleet, optimal choices in leasing, jetfuel, strategic alliances and the dualism “cost minimization versus operational process maximization. Under these assumptions, new (kind of) competitors raised as disruptive innovators: this is not only the case of low cost carriers but also of those which are progressively moving to long haul business. In the end, some possible future scenarios in Alitalia’s case are presented, suggesting both managerial and operational solutions in order to solve the unsolved, where new relevant market trends and the Italian political instability are in the background.

Keywords

Alitalia, transport economics

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