Italy's Long-Haul Market Grows Despite ITA's Slimmed Down Network

Post-pandemic, new dynamics have been at play in the Italian long-haul market and far from disappearing, long-haul flights (over 2,500 km) have almost doubled over the past 10 years and increased the share of overall capacity to 10.8%. Having previously reduced its long-haul network, Italian airline ITA faces strong competition as it looks to build it up again.

For the purposes of analysis, the long-haul market here has been grouped into segments by sector length: mid-haul (2500-4999km), long-haul (5000-7499km), and ultra long-haul (>7500km). While the different segments follow a similar trend, different factors have influenced each of them.

In 2017 Alitalia filed for bankruptcy and the airline ceased operations in mid-October 2021, when it was reborn as ITA. Whilst the new airline is essentially a replacement and a revival of Alitalia, the European Union was keen to limit the amount of ‘economic continuity’ between Alitalia and ITA, and the airline started operating a reduced fleet of aircraft and network. 

Reflecting a focus on domestic and European routes, Alitalia’s seven A330-200s were the only long-haul aircraft to transition across to ITA. Over the last year and a half though, it has started plans to rebuild its long-haul network, taking delivery of six A350-900s and another A330-200.

Since writing this blog, Lufthansa has acquired a 41% stake in ITA and we cover the headlines on this here.

Mid-Haul Growth Driven by Low-Cost Carriers in the Middle East

The mid-haul segment (flights 2500-4999km) has grown the most, recording a 7.4% Compound Annual Growth Rate (CAGR) over the period since 2013.  This has largely been driven by the growth of low-cost carriers to the Middle East.

Wizz Air was the first airline to bring ultra-low-cost service to the region and Wizz Air Abu Dhabi (a branded joint venture between the airline and the Abu Dhabi sovereign wealth fund) has a United Arab Emirates AOC (Air Operator Certificate).  Whilst Alitalia now has no presence in this segment, Wizz Air provides 18% of capacity on mid-haul routes. Italy’s low-cost and leisure carrier, Neos Air, alongside Ryanair and easyJet have all grown capacity, as well as mid-haul share of capacity, largely in the Middle East.  The biggest increases in capacity have been noted on the following routes:

  • Milan Malpensa to Tel Aviv
  • Rome (FCO) to Abu Dhabi
  • Milan (MXP) to Sharm El Seikh
  • Milan (MXP) and Rome (FCO) to Doha. 
Outside the Middle East, the Milan (MXP) to Reykjavik route has grown four-fold, with Finnair increasing capacity since Wizz Air and easyJet have started operating the route.

 

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Existing Competitors Expand Their Transatlantic Operations

The long-haul segment (5000-7499km) has grown by an average rate of 5.7% each year in the last 10 years. These routes are primarily transatlantic, where Delta Air Lines, United Airlines, Air Canada and American Airlines have increased capacity and taken share from Alitalia/ITA.  These non-Italian carriers have more than made up for the loss of Alitalia.  ITA has not resumed any of its Canadian services. Neos Air and Emirates have also increased capacity, building on operations that started pre-pandemic, to take 6% and 5% of capacity share respectively.  

In addition to North America, Neos Air operates to key tourist destinations across India and the Indian Ocean of a similar route length.

Winners and Losers on Italy's Longest Routes

The picture is far more nuanced for ultra long-haul flights of over 7500km.  Building on the pre-pandemic introduction of routes, Air China has grown capacity, increasing its share of capacity to 13%.  New routes include Milan (MXP) to Hangzhou and Rome (FCO) to Wenzhou.  US carriers have grown capacity to the West Coast, especially American and United. Both Korean Air and Asiana Airlines have taken up the capacity which Alitalia previously operated on Rome FCO to Seoul.  Meanwhile, Neos Air has steadily grown capacity to Nanjing in China, La Romana in the Dominican Republic and other destinations in Mexico and Central America. In June 2022 Qantas introduced a non-stop connection between Rome and Perth – the longest flight from Italy - which marked Qantas’ return to Italy after more than a decade and a half.

Nevertheless, the reduction in Alitalia’s long-haul operations has led to some of the furthest destinations no longer being served: these include Santiago, Rio de Janeiro, Bangkok and Colombo.  Service to Japan is now limited to Rome (FCO)-Tokyo (HND). This perhaps reflects the challenges Alitalia faced in making these routes profitable.

Strong Competition to Continue the Growth in Italy's Long-Haul Flights

Globally, long-haul flights have taken longer to recover from the pandemic than short haul. Nevertheless, long-haul capacity in Italy has bounced back and almost doubled compared to ten years ago. As it looks to expand its long-haul network, ITA now faces strong competition from low-cost carriers and legacy airlines on long-haul routes - particularly on the 2,500-4,999km and 5,00-7499km segments. With a cash injection from Lufthansa and a stated desire on the part of the German carrier to pursue a profitable long-haul business from Rome, only time will tell how successful the competitive response from ITA will be. 

Read the next part in our exploration of Italy's aviation market: European Markets, Home and Away: Italy Stands Apart


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