Economic Downturn As British Airways and Alitalia Struggle

Airline carriers knew it would be hard, but it is fair to say that they did not think it would be this tough. With the credit crunch in full swing, purse strings have been tightened coupled with volatile oil prices pre-planning and contingencies are simply not enough. The conservatives have also warned that they will not be backing the airline industry to the hill and that planning decisions are likely to be more stringent in the future. It seems to be a sorry time for BAA following the ruling that they must reduce their stranglehold of airports in the South east.

Following Alitalia filling for bankruptcy protection Italy’s national carrier has been facing turbulent times with flights grounded by ENAC and rescue plans not being forthcoming. It is not just the fact that the airline is struggling financially, it also has an impact on tourism and the respectability of the national as the PM has continued to call and rally wealthy Italian businessmen to save an airline that has losses in excess of 3million USD a day.

British Airways Plc has been on a cost cutting programme. Some positive, some not so. The good news is that BA have decided to pass on savings to consumers by reducing the fuel surcharge following the recent reduction in crude oil prices. What did not go down well was the ideas to reduce the number of senior managers by offering incentives to 2,000 managers in a bid to reduce their wage bill and increase profitability.

Ironically it is the two airlines most in the news for bad press that have shown an interest in forming an alliance as BA aims to consolidate its own position within the European market. According to a report yesterday BA chief executive Willie Walsh the new investors in the Italian national carrier CAI investor group, a decision was close to be reached in the form of a commercial agreement.

BA is not the only airline hunting the deal as some of its closest European rivals: Air France-KLM and Germany’s Lufthansa, have expressed an interest with newspaper reports in Italy indicating that Lufthansa is the favourite to acquire a 20% stake in Alitalia.

Source by Peter Charalambous