So That’s the End for Air Italy. And More Airline Money-Pits

Throwing good money after bad as a business model.

On February 10, one of the largest Italian newspapers, Il Corriere della Sera, announced airline Air Italy, Italy’s second largest airline after Alitalia, was facing a liquidity crisis and may not survive long. Less than 24 hours later, Air Italy announced it would immediately enter voluntary liquidation. It said that until 25 February, flights would be carried out by other airlines, such as Wamos Air. Tickets for flights beyond that date would be refunded. And employees would receive their severance packages “as written in their contracts.” So that’s the end.

Air Italy, a joint venture between AKFED, the holding company for the Aga Khan’s for-profit ventures, and Qatar Airways, had ambitious plans to grow into a major player in the ultra-competitive European commercial aviation market.

However, it proved to be a financial nightmare: The airline lost €164 million in 2018 and €198 million in 2019, huge losses for a company whose fleet was down to just 12 aircraft. At the time the company ceased operations, its entire long-range fleet had been reduced to four Airbus A330, leased from parent Qatar Airways at very favorable terms.

Bankruptcy and turnaround advisory firm AlixPartners had put together a tentative recovery plan for Air Italy, but it would have required capital outlays of at least €500 million over the next two years, far more than AKFED was ready to stomach.

While Qatar Airways is blaming its partners for pulling the plug on the joint venture, over the past three months it approved cutting several unprofitable long-range routes, chiefly to South Asia, and quietly took back the A330 which had operated them. Qatar Airways now wants RwandAir

Qatar Airways, having learned apparently nothing from this experience, is now negotiating with the Rwandan government to buy a large stake in the country’s flag carrier RwandAir. The airline has operated at a loss during its entire 11-year existence, and financial details for fiscal years after 2013 are difficult to access.

In addition to bad financials and poor accounting practices, RwandAir is beset by other issues: The airline suffers from the typical “bloat” of African airlines, meaning it has far more employees than it needs, and the most profitable international routes from Kigali are already served by a host of aggressive airlines, from Air France to Turkish Airlines. This is going to be quite a challenge. South African Airways gets another […]

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