The Alitalia Board Of Directors Met Today

22nd Jun 2001

The Alitalia Board of Directors met today, chaired by the President, Fausto Cereti, and the Chief Executive Officer, Francesco Mengozzi, to discuss the guidelines for drawing up the Business Plan 2002-2006 (a process which is already underway).

The discussion on the guidelines led to an examination of the problematic situation in which the company finds itself operating today, with particular reference to:
* The high degree of dispersion in Italian demand for air transport which is spread over several areas, unlike other European countries;

* The critical state of the present Milanese airport system which is spread over three airports, located geographically close together, but with insufficient demand to support all three in competing on international markets;

* The sharp rise in competitive pressure both for domestic and for international traffic;

* Italy`s geographical position which significantly weakens our company`s competitive edge in handling the main flow of air traffic between Western Europe and North America;


As far as company affairs are concerned, the situation that emerged from the discussion is as follows:
The 1998 redesigning of the network, with the introduction of the Malpensa Hub, is still not competitive, partly due to uncertainty over the role of Linate airport, and partly due to the lack of an alliance;

Alitalia`s share of some key markets has dropped, especially in the north;

* The fleet is to some extent inadequate, partly because of its diversity which inevitably leads to uneconomical management and maintenance;

* The break-up of the KLM alliance has led to Alitalia`s strategic isolation, especially in view of the lack of a partnership with a US airline;

* Due to the above factors, the economic results for the intercontinental product has a marked negative effect on the company balance sheet.
In the light of the above, and considering that the forecasts set out in the previous Business Plan have not been achieved by the company either last year or so far in the partial results for 2001, the decision has been taken to start the process of redefining the strategic guidelines for Alitalia`s core business with the aim of dealing with the critical factors outlined above, in particular, based on:
* Redesigning the network;
* Reinforcing Alitalia`s concentration on its “specific” Italian market;
* Achieving a significant increase in the efficiency of company production systems.
* Re-launching initiatives related to increasing the value of human resources;
* Using the lever of alliances to sharpen the company`s competitive edge, especially for international and intercontinental products;
* Reaching a definitive and stable solution for the
Milanese airport system;
* Devising a policy for matching the fleet to the network design;
* Strengthening our marketing and commercial strategies.

As already announced at the shareholders` meeting on May 23, the definition of these guidelines represents the start of a process that will lead to the drawing up of the Business Plan 2002-2006. This process will make it possible to evaluate the economic and financial implications step by step, through a sequence of events that will be completed after the summer. Furthermore, the Board meeting also received information regarding the prospects for a commercial alliance on a global scale.The Chief Executive Officer reported on the state of advancement of the negotiations at present underway with the US company Delta Air Lines, and with Air France and the other partners of the SkyTeam global alliance.These negotiations are going ahead and it is likely that it will be possible to initiate the start-up process by the end of the summer, with the aim of benefiting from the positive effects deriving from joining a global alliance from 2002 onwards.



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