I reveal the favors to Ryanair and the future of Ita with Lufthansa
What is the real news about Ryanair and what will be the future of Ita Airways (and of Italian air transport). The speech by Gaetano Intrieri, professor at La Sapienza University and CEO of AeroItalia
A few days ago I had the opportunity to write a piece on Startmag about the treatment reserved by the CEO of Ryanair to the Italian institutions. I must say that the Italian institutions have finally responded with dignity and firmness to Eddie Wilson's inconclusive threats. Probably near Dubino, they know little about Pareto and therefore don't know that the market when a player leaves, even as big as Ryanair, always manages to regulate itself, always finding the right compromise between supply and demand. President Schifani and Minister Urso did not fall for it, their firm position will do good for the entire air transport system of this country and it will be Sicily and Sardinia that will benefit in terms of ticket costs from this decree which imposes to limit the variance in the fare offer. Translated, it means that if you enjoy selling tickets at low prices of 10 euros, then you cannot sell the same flight for more than 30 euros. Ergo, there will no longer be passengers heading to Sicily or Sardinia forced to pay not only their own ticket but also that of the passenger who paid 10 euros and therefore sometimes forced to pay exorbitant amounts for less than 1 hour of flight.
THE REAL NEWS ABOUT RYANAIR
In this context, the real news is that something that has never happened in this country is happening and that is that finally there is a President of an Italian region who openly declares that Ryanair in the year 2022 received 15 million in contributions from an airport in your region , or from Palermo airport. The code of silence that the Italian airport system guarantees to Low Cost companies on donations of money in marketing contributions is one of the cornerstones on which the air transport system has developed in Italy over the last twenty years and the conclusion is that today air transport in Italy is collapsing. Many airports in Italy are technically in default and the marketing contracts that they were forced to sign in order to have the low-cost company ready to place flights everywhere are suffering greatly. Already in 2018 in my short period spent in the technical mission structure of the Ministry of Transport, I had warned with various analyzes still pending in the Ministry that it was not possible that the system could withstand such market distortions, and that this wicked policy of many airports would have created a single player who would in fact increasingly govern the policies of air transport in this country. Well all this has happened and is happening and it wasn't difficult to predict it having a minimum of expertise in the matter.
ITALIAN AIRPORTS AND THE MEO TEST
Italian airports should respect the rules of the so-called MEO test, but they are forced to find all possible tricks to get around it, precisely because otherwise the Low Costs would not fly to them and therefore if they respected it they would be forced to close. Some airlines have created companies officially not attributable to them in order to circumvent the rules on state aid, someone then receives contributions according to the MEO test for the first three years of opening a route and then just increase the frequencies and it continues like this for a further three years. If you pay attention, the low cost companies increase the frequencies on some routes every three years to get around this obstacle.
I highlighted all this and detailed it already in 2018 to the Ministry, trying to set up work tables to protect the Italian air transport system. Alitalia with a system operation could have been saved precisely by taking advantage of the state of extraordinary administration in which it found itself at that time. Of course, blaming Italian airports, especially the smaller ones, for the creation of this perverse system of tariffs that dramatically distorts the market would also be wrong, since for them it was the only way to defend their very survival. It's a pity that today many of them are on their last legs and pay a very high price for having allowed some Low Cost airlines to do and undo as they please.
It is therefore necessary that the airport system is put in such a condition as to be able to get out of this blackmail and it is up to the Ministry of Transport, perhaps in collaboration with ENAC, to find the formula to support airports that find themselves strangled by halter contracts. If the right countermeasures are not found, there will be an ever-increasing trend towards the monopolization of air transport in this country with a single player who will have the entire system in hand. Certainly, it will not be easy considering that the lobbying system that this carrier has been able to build in recent years also thanks to the liquidity at its disposal is now rooted in the country but in my opinion the government has no choice and must absolutely put a stop, otherwise it will be increasingly difficult for competitors to be able to find a satisfactory position in a market that is now saturated because it is distorted by marketing contribution and dumping policies.
A serious information campaign needs to be carried out in this country because if people continue to want to pay 10 euros for a plane ticket, it means that there will be someone who will pay the bill in the end and this someone will be either the unfortunate person who will find then for that same flight the fare will be 500 euros or we will all be Italian taxpayers who will pay through marketing contributions by continuing to subsidize low cost. And, these practices have nothing to do with the free market and especially with the perfectly competitive market.
THE DESTINY OF ITA AIRWAYS
Furthermore, in this scenario, the government is also facing the fate of ITA Airways. ITA is in fact nothing more than a spin off of Alitalia and, from Alitalia it inherited all the critical issues that had led to three bankruptcies in less than 10 years. ITA was structurally stillborn, starting with the leasing contracts and the choices made in terms of fleet. The internal procedures are obsolete and outside the market the distribution and offer policy is inconsistent with the dynamics of today's market, just look at the blocked pricing policy which rightly led President Schifani to define a de facto cartel created in Sicily with Ryanair .
The situation will considerably worsen in terms of the income statement as the fleet increases since the contractual conditions of leasing and technical support are not sustainable and it is clear that they are not even for the Germans if they really take over 41% of ITA. The leasing contracts signed can at best be good for a "capacity provider" or an airline that flies in the charter segment for tour operators and therefore at fixed prices, but certainly not good for an airline that wants to compete on the market for scheduled flights.
NEITHER TO THE GOVERNMENT, NOR TO LUFTHANSA
In fact, the fate of ITA is neither in the hands of the Italian government nor in the hands of the Germans of Lufthansa, but essentially depends on who I consider, together with Herb Kelleher, the genius and inventor of post-deregulation aviation. This gentleman is called Steve Hazy and he is the one who invented commercial leasing in the airline industry. Mr. Hazy is a Hungarian gentleman who moved to America where with an extraordinary intelligence he was able to build an empire through the commercialization and leasing of airplanes. Today it manages a colossus that owns over a thousand aircraft and which is called Aircraft Lease Corporation (ALC) and there is no lessor in the world that can even compete on the market with the efficiency and effectiveness of ALC. The technical skills of Mr. Hazy and his management team in the field of aircraft leasing contracts are unmatched and to negotiate with him profitably you really need to have a deep knowledge of this business model.
Personally, every time I find myself negotiating with him, I spend whole nights reading and re-reading the contract (usually an aircraft leasing contract consists of a few hundred pages) knowing that there will certainly be some remote clause which, if not duly negotiated turns into millions of euros of costs for the unfortunate person on duty. ITA had the audacity to be born and go to negotiate and finalize with this absolute genius the leasing of 31 aircraft with a portfolio value of more than two billion dollars, and when you negotiate with Mr Hazy without knowing what you are doing, the result is that in fact if you can stand it, you will work for him, that is, he will be the one who will benefit from the revenues of your airline. This is why ITA was in fact born dead and I am sure that without the solution of this problem ITA will have no future and will only be able to go through yet another extraordinary administration. I can't believe that Lufthansa would agree to join ITA without solving this problem any more than any serious person who has real knowledge of air travel would. On the other hand, knowing the extraordinary negotiation techniques of ALC and their impressive financial structure it will not be easy to renegotiate what has been signed. There is only one way, to convince Mr Hazy that what you are doing has an industrial logic and above all to convince him that his interlocutor is serious and competent, otherwise his only goal is to bring home as much money as possible.
A few days ago the government donated a further 250 million to ITA as the last capital payment admitted by the European community, that money was necessary to ensure the company's business continuity, considering that the company sails happily in the condition provided for by art. 2447 of the Civil Code, but this is really the last donation of money given that in less than three years almost 1.5 billion euros have been burned. We therefore need to find a serious solution and not think that Lufthansa is the solution to all problems as AirFrance should have been in 2008 or the Arabs of Etihad in 2014, because once again we Italians will be left with the match in hand and we will have to foot the bill .
FOREIGNERS WILL NOT SOLVE THE PROBLEM OF ITALIAN AIR TRANSPORT
To think that foreign subjects come to Italy to solve the problem of air transport in this country is pure utopia, so the only solution is to re-establish the rules of the game by protecting national players exactly as the French have always done and the Germans, only then will it be possible to negotiate with foreign subjects with equal dignity without being subjugated by snake charmers who appear credible only because they come from abroad and who have their own concept of the free market any reference to Mr. Wilson is purely coincidental . Time is running out and the situation is serious because the destiny of the mobility of an entire country is at stake with all the economic repercussions that will ensue and which will be dramatic if the right solutions are not found. The strategy of allocating the problem to third parties has never worked and will not work this time either, whoever governs the country needs to come to terms with it.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/favori-ryanair-futuro-ita-airways-lufthansa/ on Mon, 14 Aug 2023 05:42:21 +0000.