Economics of the airline industry - The Alitalia bankruptcy case: a review

Abstract

The dissertation will survey the economics of the airline industry, covering both theoretical and empirical topics. It wants to be simple and discursive to give the possibility to understand the dynamics of the industry in question in the easiest but effective way possible. The purpose is to answer to some questions: is it true that the Italian market is not profitable enough for a successful airline company? Could Alitalia avoid the bankruptcies string? What are the wrong strategies that led to these failures? What are the strategies that should be adopted to re-establish a profitable Italian flag carrier? After a quick explanation of the aviation industry, thanks to several examples, the thesis will move towards the analysis of the cost structure, revenues and profitability indexes. Secondly, the Italian market will be analysed without ignoring the wider European and international contexts. The European market follows the policies of the American one after a few years. In fact, if in the United States the market concentration is now visible to everyone, in Europe it has been emerging only in recent years. The last part will focus on analysing the Alitalia case in its entirety. The company's financial statements and the company's history will be taken into consideration as a reference. Alitalia, grew as one of the most important and recognised companies in the world but has marked significant setbacks over the years. This dissertation stems from the idea that one of the strongest economies in the world can not have its own flag airline and therefore an air transport system able to promote the growth and development of the country. The purpose of this dissertation is to recognise the problems that have stopped the growth of the company, leading it to three bankruptcies. From the analysis of the balance sheet we want to discover the indexes that could make management understand how the company had been going before it was too late. Then, the analysis of the Italian market and the European main competitors will clarify strengths and weaknesses of the Italian airlines and market it self.