Questa è l'intervista completa originale in Inglese di Hogan, senza la traduzione confusa e le omissioni di diverse parti della versione italiana, si capisce molto meglio il pensiero di Hogan:
Hogan: «Alitalia needs restructuring The Italian government has not kept promises»
Ethiad's Chairman-CEO James Hogan speaks out on his Italian venture, two years on
di Federico Fubini
FF: We talk all the time about foreign investment in Italy, most often it’s all talk and no action. You are now in your second year of your investment. What’s your impression of how you are being greeted day-to-day?
JH: Etihad Aviation Group, Etihad Airways, is a very young airline. We were able to build this airline very fast because we are a non-legacy carrier which means we weren’t bound by policies and traditions of the past and legacy agreements. We were able to create a world-class airline group with people of 140 different nationalities. European standards and European salaries and productivity that is more effective.
We embarked upon a strategy a number of years ago to invest in airlines in restricted markets for entry, like Germany, Switzerland, France and the Netherlands.
The first entry was in Australia, with Virgin Australia and that’s been very successful. We then embarked a number of years ago in a major investment in India. This year 50 million Indians will travel internationally. So creating an air bridge with Jet Airways between Abu Dhabi and India has been very valuable in generating traffic for both airlines and achieving scale, coming together to reduce unit costs.
India is a large country with a complex political system. We have a fantastic shareholder in Nahresh Goyal, who is the entrepreneur who’s the main shareholder, so we have been able to take a business from the brink of bankruptcy and for the last seven quarters we posted a profit. All the requirements we asked for were delivered.
In Germany with airberlin, that is a restricted market. From a topline perspective we have been able to generate the revenue we were looking for. We are looking to do a joint venture with TUI on leisure, we’re moving 40 aircraft to Eurowings and we are restructuring the airberlin business dramatically because the model is broken.
If you look at the other two smaller airlines, which are government airlines, Air Seychelles and Air Serbia, they are very similar to Alitalia, because both the governments in those countries asked Abu Dhabi to invest to save those companies. The governments said to me, can you make those airlines work? And I gave them a series of conditions and precedents to turn those businesses around.
In Air Seychelles I reworked the fleet, I did right-sizing and made people redundant, changed the agreements and we go now into the fourth year of profitability. And I actually reemployed more people than we had let go in the first place.
You remember Yugoslav Airlines, on the brink of bankruptcy? Again with the Serbian government we set up a plan, a new structure and made people redundant. We are now about to go into our the third year of profit.
FF: So you seem to be saying that you know how to do these things?
JH: Because we had agreements with governments, and they stood by us while we made the changes necessary. Which brings me into Italy.
FF: It seems that Italy looks like a different story.
JH: You may remember when the Government here asked me about Alitalia, I said no three times.
FF: Why?
JH: I said no because I was concerned about the conditions being met and also I was very concerned about the historical behaviour of the trade unions. What was on the positive side of Alitalia is that Italy is a great market. It’s a wonderful country because it has a good domestic market, a strong inbound market and has a strong outbound market because Italians have to travel and love to travel. So from an aviation perspective, in market size and traffic flows, Italy as a market, should be one of the most successful in Europe.
The problems we face are due for many years the changing market in Italy. We at Alitalia put together a plan to breakeven and we were very clear on what needed to be done. Network, more inter-continental flights – Alitalia started this year, Mexico City, Santiago and Beijing. We were very clear to focus on strong domestic market traffic flows, but quite frankly back then Ryanair had 20 per cent of the market and now 50 per cent.
We have refurbished all the aircraft of Alitalia today. It’s now competitive and we have retrained the cabin crew in Abu Dhabi. There’s also more training for engineers and graduates. What we said we would do, we have done in 18 months.
FF: But you have a number of requirements on the Italian side.
JH: What I am disappointed, as an investor, is that a number of the condition precedents haven’t been met.
FF: You mean, internally in the company?
JH: No, externally. One of the key issues for us was to be able to use Linate and build a much stronger base in Linate and change the Bersani law, so that we could use more flights to fly further than Europe. Now unfortunately that’s caught up in the European process, and it’s also caught up in internal lobbying between Malpensa and Linate.
FF: Is it up to local authorities to sort out?
JH: It’s up to the Ministry of Transport to push that through. We simply want to see liberalisation, because all the airports in the world can’t tell you when you can and can’t fly. London City, Heathrow or Gatwick. Three airports that are open for all. But here in Italy you‘ve got Linate restricted. So we can’t use it as effectively as we want to.
FF: So you are not operating at full capacity and Linate is not operating at full capacity?
JH: Correct. But we have put together a plan to rebuild the business over time
FF: So you are saying the government should be more forceful in making sure that precondition is met?
JH: As an investor we have a responsibility on the industrial plan, a responsibility to the people of Alitalia, who are good people. But coming into the transactions, the conditions we expected with regard to the decree to use Linate more effectively.
And we asked the government to put forward a fund to build a stronger tourist industry in Italy.
FF: Which hasn’t happened yet?
JH: No. It didn’t happen in 2015 or in 2016.
FF: Was it promised for last year?
JH: If we want to rebuild the airline’s brand in America, there is a lot to do. We need to be able to communicate Italy as a destination and how you can possibly get to that destination. We haven’t seen the Italian tourism industry support us to promote Italy in the way we spend money to do exactly that. And that was a requirement.
FF: The government committed to spend €20 million a year to support Italy as a destination.
JH: Correct. In most markets of the world national carriers are protected to some degree so that as I mentioned earlier, but here in Italy you have six low cost airlines and you have none at Heathrow and none in Paris Charles de Gaulle.
FF: You have legitimate concerns, why didn’t you raise the issue with Prime Minister Renzi?
JH: We do. We raise these issues with the Minister of Transport. What we see in other national carriers, we believe Alitalia should be treated the same.
FF: Do you feel you are being put at a disadvantage?
JH: Alitalia is rebuilding, Alitalia needs to get back on its feet. The competitive issues and the economic issues are our job and we’ll tackle those. But the stakeholders of Italy Inc must also help the Italian carriers. If they don’t, that’s a major concern.
FF: You look more disappointed by the government than with the trade unions.
JH: No, I am disappointed with the trade unions too. When I did this deal I was very clear with them, I needed three years of industrial peace to rebuild this business. We are just 18 months into it and in a dispute that was about something that cost the same as a cup of coffee they called a strike.
And what concerns me is that strategically we want to grow this business but unless I have responsible partners that makes it very difficult for me. ou know, in all these other airlines in which we’ve invested, we have never had a strike. And here, in fact, there was a strike over changing a condition that was being exploited and didn’t impact people’s salaries, didn’t impact the contractual requirements. It was a benefit that no other airline in the world has, and the trade unions decided to use that as a reason to go on strike.
FF: So if this company needs to do more to break even, workers will also be part of the restructuring. You worry that the minute you start talking about it, there will be industrial action and that might unravel everything.
JH: The reality is that for all legacy airlines in Europe the market is changing. You see very good restructuring by British Airways and Iberia, to compete with easyJet and Ryanair. You see us being back with brand, product and service to be competitive. But we need to continue the restructuring to become more efficient. Taking advantage of technology and finding ways that people are more productive.
FF: What does that mean?
JH: How does Alitalia use its workforce more effectively? How can it maximize the number of hours aircraft can fly? And maximizing the legal use of workers. As long as things are done, of course, within the legislative framework.
FF: Does restructuring mean Alitalia needs less workforce?
JH: On the one side of restructuring we may need to downsize, but if we grow the business in the longer term and bring on more aircraft, we may downsize in one part of the business with skillsets that are no longer relevant and grow in other parts of the business where we can employ more pilots, more cabin crew and more engineers.
FF: What are the redundant skillsets and in percentage terms?
JH: That’s for the CEO of the airline to decide. I am talking to you strategically what we have done at other airlines within the Etihad Group. We have downsized head offices, we have outsourced in some cases technology and we have been much more efficient in booking and processing. And on the other side, we have taken on more graduates, more long haul flights for long haul staff development again.
FF: Do you think it might make sense to rework the existing contracts to make sure some jobs are protected?
JH: You know, it depends on your definition of protected. We are a commercial business, in no commercial business are jobs protected. What we look at is how we take advantage of technology to improve the process.
Now we operate 24 long haul aircraft. We are reworking our business plan because domestic Europe is very much a low cost business, we have to change the narrow body agreement. But we see an opportunity to bring more long-haul aircraft into Alitalia. For pilots, that means progression. From a financial point of view it’s more attractive for them, and that creates more command opportunities and development for them.
FF: Do you want to increase supply?
JH: Correct. Now, at Fiumicino Airport you have got very strong engineering facilities. They are empty, because over the years they have been broken out. We have a task force looking how we can rebuild that with the right contract. What we are saying is, this is a strong market, how do we play to the strength of long haul, how do we work with European partners to strengthen the intra-European flows. What can we rebuild? On the other side how can technology help us out. But yes as in many businesses you have to review the contracts and structure.
FF: Existing contracts as well?
JH: Of course. But that’s a dialogue, as we do in other countries. You don’t go on strike for the sake of just going on strike. When you go on strike, you damage your own business, the confidence that’s being rebuilt. You are damaging market confidence, and we have enough battles outside, and we don’t need battles within.
FF: Are you saying all those things because losses are larger that you expected?
JH: I am saying it because evolution and restructuring are parts of any business. This is what we do. This is not the first time we have done this. In year one we hit the numbers. This year with terrorism, with Brexit, but also with the opening up of this market to low cost airlines average fares have been damaged.
We are committed to Alitalia and we’re committed to the partnership, to tackle these issues, but frankly as an investor we need Italy to support us.
Intesa and Unicredit have been strong with us, very strong. But we need the other stakeholders of Italy Inc to support us. And we need the Italian public to believe in Alitalia too.
I believe this business can work, but it needs a revision to the industrial plan due to the economic crisis in Europe. As we get more involved and certain obligations haven’t been met, then they put us on the back foot. And Alitalia needs to have more consideration as we navigate this path. I am not saying protectionism, I’m saying consideration.
FF: This company has probably made large losses for the last six months. What’s the way out?
JH: This is what we do. We restructure airlines, we restructure businesses. We have been with other airlines in a similar place and these airlines are now profitable. So we will work through this. But I need stakeholders to deliver on their commitments and some of them to understand we need to change the business. And that isn’t unique to Alitalia, it’s all airlines within Europe. We’re very focused on the course of action and we’ll work through different scenarios, but the conditions that were committed need to be delivered.
FF: Did you expect a more business friendly country?
JH: You know, the will coming in was very strong. That’s why we stepped in. I just expected delivery of what was committed.
FF: Some say the real Italian airline of today is Ryanair. 15 bases in Italy. Are they financed by local authorities? Do you want the same treatment?
JH: The chairman and CEO of Alitalia have been very clear to regional airports by saying provide us with the same conditions and let Alitalia compete. It’s as simple as that. They have engaged with regional airports.
FF: Will you restructure Alitalia like you did airberlin?
JH: What we are doing in Germany is reworking our cost base. We’re talking about restructuring at Alitalia that achieves sustainability and we have to adapt the industrial plan. There are other elements that we have inherited from the past such as the pre-existing agreement with Air France and Delta which restricts the network development of Alitalia. We believe Alitalia should be a much stronger transatlantic airline between the US and Italy, not just Rome and Malpensa but other Italian cities too. We believe this business can work but we need to have the other stakeholders in Italy supporting the Etihad Aviation Group, supporting Intesa and supporting Unicredit.
FF: Have you been to see the Minister of Transport
JH: I saw him recently and he knows exactly my view.
FF: How did he answer?
JH: You’d have to ask him.
FF: And in conclusion?
JH: Let me finish where I started. From an aviation perspective, Italy is a strong market. From a tourism and destination perspective, one of the best markets in the world. And from a people perspective the people are good. We just want to create the right framework for them to be successful and that enables us to grow Alitalia into the future.
http://www.corriere.it/economia/16_...es-4a8978bc-8bbf-11e6-bd58-d9bfb1cfb56c.shtml