During the course of today`s meeting held prior to the Shareholders` meeting, the Board of Directors of Alitalia S.p.A., amongst other things, carried out a review of the factors that have impacted the Company`s business results to date.
Particular reference was made to:
* decelerating growth in the Italian market
* problems with Air Traffic Assistance
* the effects of the war in Kosovo
* the persistent crises in certain European (Eastern Europe in particular) and long-haul markets (Far East, South America)
* problems with the start-up of the Malpensa hub
As for the trend on the Italian market, it was shown how the combined effect of these factors has led to a loss of revenues in the first half of approximately 200 billion lire, as well as additional costs of some 20 billion lire, merely due to longer flight times caused by the abnormal level of delays as a result of the foregoing factors.
As regards foreign markets, on the other hand, considerable growth in transit traffic, thanks to the opening of the Malpensa hub, made it possible to maintain revenues at much the same level as the same period of last year. And this despite having to cope with recession in Central-South America and the ongoing price war on North American routes, factors which have hit competitors even more than Alitalia.
Looking now at changes in costs during the first half, the Board took note that the increase in capacity compared with 1998 (around 6%), higher fuel costs and longer flight times will substantially raise the level of expenses compared with the same period last year.
In any case, the contribution made by extraordinary income (on the disposal of Equant and Galileo) means that it is possible to confirm the forecast of a half-yearly Group result close to break-even.
Lastly, it was pointed out that, considering the economic scenario, if circumstances for the rest of the year are the same as they are now, it is reasonable to suppose that the Group will break even both at the first half year and at the close of the financial year in December. And this despite the fact that the second half of the year is better from a seasonal point of view.
However, the end of the Kosovo conflict, a foreseeable economic recovery and the measures taken to cope with the problems mentioned above, suggest that a reversal in the current trend can reasonably be expected in the not-too-distant future.
Having made the point that these various factors are obviously of a transitory nature, the Board also felt that they could reconfirm the strategic decisions and economic objectives of Alitalia`s industrial plan; underlining the fact that once there is a definitive split of the traffic between the two Milan airports, the Company will be able to promote its services even more competitively as soon as the winter of 1999-2000, when the alliance with KLM and Northwest will be applied on a wider scale through a new multi-hub network system based on the Rome/Milan/Amsterdam airports.
In the same meeting, the Board further launched a substantial plan for investments in the fleet for an overall amount of nearly 2,000 billion lire.
The plan envisages the replacement of 4 B747-200s and of 6 ATR42-300s by 5 B747-400s and 16 fifty-seat regional jets.
More specifically the Board ordered 5 B747-400s to be delivered in the first half of 2001 and 6 EMBRAER ERJ 145s to be delivered in or before October 2000, on top of the purchase of 10 options for the latter aircraft with deliveries to be made in the 2001-2002 period. The regional jets will be operated by Alitalia Express.