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Topic: AZ To Drop Beijing
Username: dtfg
Posted 2013-02-02 11:09:30 and read 9128 times.

According to Airlineroute, Alitalia will stop its Beijing service from March 6.

AZ resumed Beijing tow years ago, and now drops again. What do you think is the reason?

Topic: RE: AZ To Drop Beijing
Username: ammunition
Posted 2013-02-02 11:15:42 and read 9105 times.

Pricing errors resulting in people being able to book a return ticket for less than 2-300 Euro return on much of their long haul network may have been a contributing factor. I suspect also that skyteam would rather route via CDG etc.

http://www.holidaypirates.com/italy/...-tokyo-179-osaka-198-trip-incl-tax

[Edited 2013-02-02 11:17:16]

Topic: RE: AZ To Drop Beijing
Username: BestWestern
Posted 2013-02-02 22:34:23 and read 8149 times.

Quoting ammunition (Reply 1):
Pricing errors

Simple - lack of yield, lack of connecting passenger base. Watch the LO service being dropped soon also.

Topic: RE: AZ To Drop Beijing
Username: Cassi
Posted 2013-02-03 00:09:33 and read 7937 times.

Alitalia has suspended all flights operated by Carpatair to Italy. The 2 other affected destinations are Bologna and Pisa.

http://www.flightglobal.com/airspace...flights-with-carpatair-planes.aspx

Topic: RE: AZ To Drop Beijing
Username: gabrielchew
Posted 2013-02-03 02:27:44 and read 7609 times.

I'm very surpised that AZ can't make PEK work. In the past year, I've flown a few AZ routes to NRT...they're pretty busy, and average fares are high. The Japanese love coming to Italy. And the Chinese? They love it too. Air China has twice daily flight to MXP (not sure about FCO). The demand must be there. I guess AZ just haven't marketed their flights correctly to the local market/travel agents. They've sucessfully shown that they can tailor to a tricky Asian market (Japan), so China really shouldn't be so different.

Topic: RE: AZ To Drop Beijing
Username: BestWestern
Posted 2013-02-03 02:34:39 and read 7571 times.

Quoting gabrielchew (Reply 4):
I guess AZ just haven't marketed their flights correctly to the local market/travel agents.

The local market ex China either flies the state airline (Air China) on government business, or goes on an inclusive tour package. Neither are high yielding. The tour packages are bargain basement seat filling yield.

I would wager that the vast majority of capacity between China and Europe is loss making at present.

Quoting gabrielchew (Reply 4):
I've flown a few AZ routes to NRT...they're pretty busy, and average fares are high.

NRT and PEK are two very different markets - one is a mature wealthy economy, and one is an immature growing economy.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-03 03:31:21 and read 7422 times.

These are the consequences of hubbing at FCO. Poor connections and low yields and alot of backtracking. AZ should look to Milan to establish a hub.

Topic: RE: AZ To Drop Beijing
Username: rutankrd
Posted 2013-02-03 03:35:40 and read 7401 times.

Quoting BestWestern (Reply 5):
The local market ex China either flies the state airline (Air China) on government business, or goes on an inclusive tour package. Neither are high yielding. The tour packages are bargain basement seat filling yield.

I would wager that the vast majority of capacity between China and Europe is loss making at present.

The Chinese airline "industry” is smoke and mirrors !

Topic: RE: AZ To Drop Beijing
Username: BestWestern
Posted 2013-02-03 04:35:04 and read 7154 times.

Quoting rutankrd (Reply 7):
The Chinese airline "industry” is smoke and mirrors !

I disagree - All I am saying is that International flights from China to Europe are yet to demonstrate long term profitability. For example I understand that KL is still loss making to CTU, yet 2013 will see new services to FRA, CDG and LHR on top. I would wager that the vast majority of secondary hub routes are loss making - LH dropping CAN for example.

Secondary carriers, such as AZ, LO and HU will find it difficult to make money to Europe also.

Topic: RE: AZ To Drop Beijing
Username: AussieItaliano
Posted 2013-02-03 05:41:18 and read 6563 times.

Quoting miaintl (Reply 6):
AZ should look to Milan to establish a hub.

That's been tried before, and failed. It can't work as long as LIN remains open. LIN is much closer to Milan's city centre than MXP, but it can't handle long haul flights. In order to remain competitive, AZ has to offer flights to Italian and European destinations from LIN, otherwise LH, AF, LX, BA and KL will take all of the European traffic.

Part of MXP's problem is that it's so far away from the city centre, so everyone going to/from Milan would much rather use LIN. In Rome, FCO is more easily accessible than CIA, so carriers fly to FCO. Since FCO is also the long-haul airport for Rome, this makes it easier for AZ to build a hub there.

To build a hub, you need both local and connecting traffic. If the local traffic has a more convenient airport to use for short-haul, but not long haul, this kills the possibility of a comprehensive hub in that city, because the long haul traffic has to be at a different airport than the short haul traffic. This is why DEN and MUC were success stories (because Stapleton and Riem were closed), whereas MXP and YMX were not (since LIN and YUL remained open for short-haul traffic).

This is entirely relevant to this topic, because the reason for the failure of many of AZ's long-haul routes is that while Rome is a good structural place to build a hub, the demand for business traffic is predominantly from Milan. The only way that AZ will be able to build a sustainable long-haul network will be if either:
1) Rome becomes Italy's business centre instead of Milan (highly unlikely), or
2) LIN is closed, and all Milan traffic is forced to relocate to MXP.

However, AZ makes a good amount of money on their short-haul from LIN, so it's unlikely that they'll push for it's closure. Perhaps, now that AZ is being forced to hand over slots to U2 to compete on the LIN-FCO route, AZ might see a dent in the revenue from this route and at that point, having LIN closed might not be as bad for them.

Until then, we'll probably all be commenting on topics like this one about AZ's long-haul network. Many of their FCO long-haul routes are in jeopardy because the business traffic from Rome is not as huge as that from Milan.

Topic: RE: AZ To Drop Beijing
Username: rutankrd
Posted 2013-02-03 06:21:19 and read 6232 times.

Quoting BestWestern (Reply 8):
I disagree - All I am saying is that International flights from China to Europe are yet to demonstrate long term profitability

When I say smoke and mirrors I was specifically referring to the Chinese operators (All remain tools of the state) and effectively regional divisions of the CAAC.

I am not doubting that there is money to be made just a more cautionary approach - Its not a gold mine for tapping SLFs.

As others have said the East- West traffic flows remains very controlled.

Topic: RE: AZ To Drop Beijing
Username: b2319
Posted 2013-02-03 06:27:42 and read 6180 times.

All,

I can't really comment so much about the Italy end, however pairs of airports, one close to the city, and one further out, do work in other places- SHA/PVG, HND/NRT, TSA/TPE etc. I think the difference to LIN is that all of these city centre airports can handle the 'big boys'.....?

Whilst a little reticent to disagree with BestWestern, whose views I respect greatly, I think airlines would be reluctant to publish individual revenue or profit details for individual routes. First, I'm hearing that cargo from CTU is an important factor. Next, within China, I see a large difference between PVG demographics (mainly commerce and manufacturing) and PEK (mainly politics).

Travelling in China, I am constantly educated with the sheer 'numbers game' here. I go to a new city, and my colleagues state it is a 'small city'. This 'small city' turns out to have a population greater than some European countries, for instance. Independent of the province I travel in, the Chinese middle classes are on the rise and aspire to travel.

I'm too lazy to retrieve the quotes, however there are many people here who simply refer to AZ as a 'basket case'. Maybe that's the real reason they are pulling out of PEK? If you've a high cost structure, prominent unions, interference from government, etc, etc, etc.....all simple questions, NOT allegations, maybe this motivates you to market your fares at relatively high cost.....?

In summary, whilst PEK and FCO may be outliers in that neither are capital cities closely connected to business and manufacturing, overall, China should be an opportunity for well-run airlines. I don't doubt KL, LH & BA know what they are doing regarding direct routes to the secondary and tertiary cities in China.

Just my views, that is all, and time will tell, I am sure.

Regards

B-2319

Topic: RE: AZ To Drop Beijing
Username: BestWestern
Posted 2013-02-03 08:27:33 and read 5271 times.

Quoting rutankrd (Reply 10):
When I say smoke and mirrors I was specifically referring to the Chinese operators (All remain tools of the state) and effectively regional divisions of the CAAC.

That is an over simplistic view of things - the airlines do compete, albeit in a semi-controlled fashion.

You see carriers like CZ really getting their act together in terms of quality, and the positive effect this is having on yield - although they miss the Shanghai market yield - their RASK is now higher than MU, whose service really is poorer. Although we may criticize skytrax - at least the Chinese carriers are aiming towards service quality, and getting there. CZ safety record is also excellent.

The fantastic (and cheaper) Hainan air is mostly independent of the state and has the potential to rival the Qatar's of this world in terms of service quality - their hard product is already better.

Topic: RE: AZ To Drop Beijing
Username: 777way
Posted 2013-02-04 10:08:05 and read 3666 times.

Why was the word Dumping removed from topic title, was it insulting? the title was AZ or Alitalia dumping Beijing.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-05 08:19:21 and read 3250 times.

Does anyone know if AZ will eventually drop ORD, EWR, and LAX? I know their yields are pretty bad out of FCO which is why they can only operate seasonally instead of year-round. AZ has to either ditch the Rome hub idea or reconfigure their cabins and seats to make it high-density so the Rome hub can have at least some chance of working

Topic: RE: AZ To Drop Beijing
Username: delta2ual
Posted 2013-02-05 09:05:28 and read 3172 times.

Quoting miaintl (Reply 14):
Does anyone know if AZ will eventually drop ORD, EWR, and LAX?

ORD is seasonal and they already dropped EWR.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-05 10:34:59 and read 3063 times.

Quoting delta2ual (Reply 15):

But why are all these long-haul routes failing? Its because of FCO and poor yields and connections. AZ desperatly needs to change their strategy and become a different airline if it is to survive and remain competative in the long run. Joining AF will help them out.

Topic: RE: AZ To Drop Beijing
Username: flyyul
Posted 2013-02-05 10:55:58 and read 3024 times.

Quoting miaintl (Reply 16):
But why are all these long-haul routes failing? Its because of FCO and poor yields and connections. AZ desperatly needs to change their strategy and become a different airline if it is to survive and remain competative in the long run. Joining AF will help them out.

Why did Shanghai Delhi San Francisco Dubai Bombay Dakar all fail out of MXP?

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-05 11:44:33 and read 2954 times.

Because MXP was dehubbed in 2008, due to pressure of AF. Plus alot of people in Italy oppose an AF takeover because AF plans to make AZ a feeder carrier. So Silvio Berlusconni is correct to oppose such a takeover. Dont forget that the idea to move AZ's hub to Rome was Air France's, and the reason was to weaken AZ.

Topic: RE: AZ To Drop Beijing
Username: flyyul
Posted 2013-02-05 12:08:28 and read 2899 times.

No - Alitalia had publicly mentioned they wanted to pull out of these markets due to unprofitably. They wanted to redeploy assets to Rio, Los Angeles, and Montreal at the time.

AF has no involvement in the AZ planning process - not even sure they have antitrust.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-05 13:33:11 and read 2815 times.

But the idea to shift hubs was AF. AF made it clear that it would take over AZ o the condition that it shifts its hub to FCO. This was all back in 2007/8.

Topic: RE: AZ To Drop Beijing
Username: mozart
Posted 2013-02-06 04:23:28 and read 2632 times.

Quoting miaintl (Reply 18):

Plus alot of people in Italy oppose an AF takeover because AF plans to make AZ a feeder carrier. So Silvio Berlusconni is correct to oppose such a takeover.

Why is he "correct" to oppose such a takeover? The result was that indeed AZ did not become an AF feeder, but the other result was also that AZ is still a company that finds it difficult to perform well financially. As a matter of fact the "consortium of Italian investors" want to sell their stake as soon as possible, hence also the renewed discussion about AFKL now buying a share.

Quoting miaintl (Reply 18):

Dont forget that the idea to move AZ's hub to Rome was Air France's, and the reason was to weaken AZ.

That doesn't sound very convincing... If indeed AF had that influence that would have been purely because it was going to be the next big shareholder. But as a next big shareholder they wouldn't have any interest to weaken the airline they were just buying. Alternatively they were not the next big shareholder, in which case they wouldn't have had any influence on AZ's discussion to move the hub to FCO.

So what you say doesn't make much sense.

Topic: RE: AZ To Drop Beijing
Username: leftyboarder
Posted 2013-02-06 04:29:50 and read 2623 times.

In any case, I hope AZ finds a way to work long haul. I can't imagine a country of 60m people left without their own long haul airline. Hungary I can understand, but Italy?

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-06 07:36:46 and read 2509 times.

Quoting leftyboarder (Reply 22):

That way is to focus their long-haul operations in Milan and only have a focus city in Rome. There is a reason AZ dehubbed FCO back in 1998 in favor of MXP:

Topic: RE: AZ To Drop Beijing
Username: flyyul
Posted 2013-02-06 07:39:50 and read 2507 times.

And there's a reason why MXP was dehubbed 10 years later to go to Rome. Now we're just going around in circles

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-06 10:25:11 and read 2478 times.

I think MXP as a hub could work in priciple but there where too many things AZ did wrong at the time which hindered MXP becoming a success. For example AZ had its training and logistic center based at FCO while most of its flights where based in MXP. Also it insisted on keeping LIN open which took away O&D traffic from MXP. Too many things where done wrong at the time and still being done now. AZ's management never learns.

Topic: RE: AZ To Drop Beijing
Username: flyyul
Posted 2013-02-06 11:51:07 and read 2414 times.

Right - its AZ management that decided to build MXP and not close LIN.

Give AZ management some credit, they work in a highly charged political environment.

May I ask how much experience you have in the airline industry to criticize airline industry experienced staff?

Topic: RE: AZ To Drop Beijing
Username: AussieItaliano
Posted 2013-02-06 13:01:13 and read 2389 times.

flyyul, I agree with you 100%. If anything, I think that keeping LIN open in Milan enabled AZ to dominate the Italian domestic and European market from Milan, which I think was their first priority regarding business traffic from Italy's business centre.

However, I do think that this prevented them from being able to build a successful hub in Milan which would include long-haul, simply because the business traffic would be concentrated at LIN and AZ can't fly long-haul from there.

In no way do I think that the management decisions of AZ were wrong. They had several priorities, and had to try to accommodate as many of them as possible. I frequently fly AZ when I go back to Italy, and often fly LHR-LIN and then connect there. For onward connections to Italy, it works well.

The fact that LH Italia failed shows that Milan is not an easy market that a "well-managed" carrier can just come into and make a profit. I think AZ deserves a lot of credit for being able to make Milan profitable, but in doing so, is not able to establish a profitable long-haul hub from Milan, and that is, unfortunately for AZ, where the majority of Italy's long-haul business traffic flies from.

There is no easy solution, but I give AZ management a lot more credit than most do.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-06 13:50:18 and read 2358 times.

Closing LIN to mainline carriers is one option. Let Easyjet fly out of LIN and let the legacy carriers all fly out of MXP. The distance between MXP and the city center is about the same as the distance between central Rome and FCO.

Topic: RE: AZ To Drop Beijing
Username: AussieItaliano
Posted 2013-02-06 14:53:56 and read 2309 times.

Quoting miaintl (Reply 28):

Closing LIN to mainline carriers is one option. Let Easyjet fly out of LIN and let the legacy carriers all fly out of MXP. The distance between MXP and the city center is about the same as the distance between central Rome and FCO.

Italian politics would never allow for this. AZ is partially state-owned. There's no way that the government would allow U2 to have the best access to the business travellers over a state-owned carrier.

Also, the difference with Milan and Rome is that Milan has another airport which is more convenient for access from the city centre. Rome does not. CIA is not nearly as convenient to central Rome as LIN is to central Milan. That is why CIA is a base for Budget carriers while LIN is where mainline carriers prefer to fly into.

And that's also why Rome is the only Italian city that could develop the traffic for a long-haul hub, because the airport deemed most convenient for central Rome as well as most Romans handles long-haul traffic, Linate Airport, the more convenient airport for most Milanese, and that most convenient to central Milan, cannot handle long-haul flights.

The problem for AZ is that the only city that has the theoretical structure for a long-haul hub (Rome) is not where most of the business traffic goes (Milan).

Imagine what would happen to Heathrow if long-haul flights couldn't operate from there. BA would have serious issues building a hub. They would want to keep their European routes from LHR because business travellers would still want to fly from there. But they would have no feed for their long-haul flights, which would all be from LGW, STN or LTN. And that's in London, which has much more business traffic than Milan.

To build a successful hub, the O&D traffic and the connecting traffic need to be at the same airport. Milan's problem is that as long as LIN remains open, but can't handle long-haul traffic, the O&D preferred airport will be different that the airport that could serve as a long-haul hub. Rome does not have this problem since most Romans do not consider CIA to be more convenient than FCO.

Topic: RE: AZ To Drop Beijing
Username: LipeGIG
Posted 2013-02-06 17:52:54 and read 2206 times.

I see as main reason the competition from Gulf carriers together with the small level (compared to UK and Germany for example) of business ties between Italy and China.
AZ need to focus before in key markets where they have true advantage such as Latin America and Africa.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-06 22:44:38 and read 2129 times.

Quoting LipeGIG (Reply 30):

Exactly but we dont see AZ expanding to those places. Rather they prefer expanding to cities like CPH, WAW, and PRG. AZ is not expanding smartly in order to make an FCO hub truly profitable.

Topic: RE: AZ To Drop Beijing
Username: dtfg
Posted 2013-02-09 13:41:18 and read 1830 times.

Quoting LipeGIG (Reply 30):
I see as main reason the competition from Gulf carriers together with the small level (compared to UK and Germany for example) of business ties between Italy and China.


If you look at the prices offered by AZ,CA,EK,EY,QR and SU, for Beijing-Rome, AZ still have the advantage. So I do not see the Gulf carriers as a major threat to AZ. In addition, AFAIK, CA and Mu have been increasing frequencies from PEk/PVG-FCO/MXP. The market is there but the problem is AZ never seized the profitable part.

Topic: RE: AZ To Drop Beijing
Username: alitalia610
Posted 2013-02-10 04:43:44 and read 1582 times.

Quoting miaintl (Reply 6):

Absolutely false. Remember that AZ decline started right after moving its hub from FCO to MXP.

Topic: RE: AZ To Drop Beijing
Username: miaintl
Posted 2013-02-10 12:27:39 and read 1362 times.

Quoting alitalia610 (Reply 33):

I highly doubt that is the case. What evidence do you have of that? AZ is bleeding tons of money right now whilst it is based in FCO. So FCO does not equal profit. AZ's problems are deeper than MXP or FCO. It is a corrupt government owned entity that has terrible leadership who are easily manipulated by politicians and lobby groups which are the main reason of AZ's problems. Sadly, in Italy politics and buisness do not know how to remain separate.


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