As an ex Alitalia manager (Northern California 1998-2002), I may be able to offer some perspective on this matter.
In South America, there is a disproportionately high percentage of Italians living there, especially in the deep south, Brazil and Argentina to be specific. Venezuela also has a strong local Italian home market. However, this is not the sole reason that Alitalia flies between these markets. There is a good amount of commerce that is done between South America and Italy (again predominantly from the deep south) and so those two factors, as well as the fact that for the wealthier Italians, Brazil is a particularly interesting tourist destination, as is Argentina. Even though Venezuela is a solid tourist destination, Venezuela is more VFR traffic (visit friends and relatives) traffic than pure "vacation" traffic. However, no matter, the fares are still quite high.
Now with regard to the fares, there is this "low fare, high fare" argument going back and forth on this thread. I have not examined the fares, but if what Pe@arson is saying is correct, these fares are hardly low yield. I have not looked at them closely to comment on the yield. However, I will say this. The fares to the deep south in Magnifica are quite high and if the loads are quite high in both cabins, then the flights will make money. Also remember, the 777 can lift quite a lot of cargo as well and if there is a good cargo market between the two points, then there is no reason to believe that the flights are not doing well.
Caracas is another matter. While Caracas does have relatively high fares and high loads, it is impaired by the fact that the 767 cannot carry large cargo. Therefore, its revenue base must come principally from passenger revenue. The economics of the 767 are good enough, but if the Caracas market is seasonal (and since I don't know enough about it I can't comment on it), then there might be problems with its profitability.
So a couple of questions about Caracas if anyone can answer them:
1. Is Caracas traffic seasonal, e,g. are the flights consistenly full year round, or are there periods when the flights go empty and if there are, what periods and what directions?
2. If there are low fare periods, do they match up with the periods when the flights are empty as in question number 1?
3. What percentage of traffic originates in Italy, what percentage of traffic originates in Caracas and potentially other points around Caracas that would connect to the AZ
Give me these three answers and I can give you an educated answer as to the situation regarding the profitability of the flight. How can I do this? Simple. I had an AZ
operation in SFO
and I faced the same problem that I think Caracas faces now. Large home Italian market, long haul (over 10 hours) with 767, restricted cargo, no beyond traffic to carry (local beyond SFO
), not enough beyond MXP
traffic originating SFO
, etc. etc. and a problem with seat allocation during certain times of the year.
If the flight is full all year to Caracas and AZ
is rejecting demand, there may be an argument made to upgauge the aircraft to a 777. The 777 doesn't burn that much more gas for the distance than a 767 and can carry almost 50% more payload. The seat costs would be lower and there would be an opportunity to grow the market....IF
the market could support it. However, that is something I am not sure I can say right now....I would need the answers to my questions. If someone could answer them, I'd be able to give at least an educated guess.
Lastly, a question for Best Western: You said that not one AZ
intercontinental market makes money: This is a very sweeping statement. How do you know this? Please explain, because I have information that may contradict your statement...so I would appreciate knowing the source for your statement.
AZs financial situation stems years of confrontational labor relations and a poor management orientation toward the changes in the airline industry in the last 30 years. The Italians are getting their arms around the problems at AZ
and are making an honest effort at changing them.
For the record, AF
are operating as separate brands although they are one company. I believe should AZ
join that group that it will retain its own branding and the three units, operating as one will retain their unique brands. This would be the one true example of what Europe was trying to achieve: A common economic unity without losing the identities of its members.
Let's hope that AZ
can put its house in order so that it can join AF
/KL and become a part of this much larger force.
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998