Alitalia had to sustain a costly duplicate operation in Milan.
They had to duplicate many domestic and European capital routes from MXP for the sole benefit for connections, while its primary domestic and European capital customers selected to fly from LIN.
AZ left MXP 12 years ago yet you are saying the same nonsense showing you don't understand why AZ never made a profit in this long period. It's like these 12 years passed without a trace for some people.
AZ simply left MXP or forced out by competetion ? The simple answer is they can`t compete at this airport !
You have to remember that back then easyJet wasn't even flying to MXP, neither was Ryanair or Wizz. MXP was essentially a ghost town other than during AZ's banks. AZ had very little competition at MXP. Lufthansa gave it a go once AZ pulled out, but even they were unable to make MXP work.
The result was also AZ having a triple operation to some airports from FCO, LIN and MXP. It was hardly efficient and it was actually quite common to see double connections proposed because the timings were poor. Essentially, whilst AZ needed to be present in Milan for long-haul flights, the short-haul situation/split meant MXP could never be a successful hub. Bolstering the hub in FCO was pretty much the only realistic option for AZ back then.
Also important to remember that AZ was chasing low yield out of MXP with a lot of high CASM ATRs, 145s and 170s - it was hardly the efficient set up. The product itself was also poor (the Schengen lounge resembled an Autogrill on the Autrostrada and was always overflowing with people. Not to mention a poor onboard product, surly flight attendants). Alitalia also had a very poor reputation both in Italy and in Europe which meant that some people purposely avoided flying the airline.