Interview: Alitalia CEO Silvano Cassano

Teetering on the edge of bankruptcy, Alitalia last year sold a 49 percent stake to Etihad, and now the Italian national airline is back in investment mode—expanding routes, improving its distribution technology and preparing for a complete fleet overhaul. Silvano Cassano, who became CEO at the beginning of this year in conjunction with the Etihad deal, spoke with BTN transportation editor Michael B. Baker at the carrier's New York office. An edited transcript follows.

What are you focusing on now?

We're undergoing a major renovation plan. We're going to invest $800 million in the next three years, half of which is a fleet upgrade. The new configuration will be business-class seats, reclining seats, Wi-Fi, in-flight entertainment and great superior food service and catering throughout the flight. We are developing new routes, especially to Asia. The North American market is the most important market for us. Certainly, the strong dollar will mean that many more Americans will fly to Europe, and most of them want to come to Italy, so we're happy about that. Our numbers are growing. We fly from Miami, New York, Boston, Chicago, Los Angeles and Toronto, and we're going to open up in San Francisco. South America also is very important because … many there are third-generation Italians. Thanks to our relationship with Etihad, we're developing the Asian market, which is very important from a business point of view. We're going to fly directly to Shanghai, Seoul, Tokyo, Beijing and three dailies to Abu Dhabi from Milan, Rome and Venice. Via Abu Dhabi, you can go to India, Australia, the Seychelles and all of Southeast [Asia]. So, if you combine the traditional strength of Alitalia from North and South America, plus the opportunity of linking our customer in the Asian market, they're a great combination.

We have a unique opportunity also to upgrade and put our people in a position to give better service by spending a lot of money on training. We have 11,000 employees, all of them are very strongly attached to Alitalia and the key element in satisfaction is passion and service, so we make sure that everybody even in Abu Dhabi or in Rome receives training to give better service. There is a ranking done with Skytrax, which ranks all the airlines. Today, Alitalia is a three-star airline out of five. We want to become a five-star airline by making all the right investments and being focused on customer service.

Were you doing much business in Asia before?

That was the key weakness of Alitalia, and that's why the relationship with Etihad is so strong. There was no overlap, and that's beautiful. Alitalia started flying to Tokyo in '62, but basically, that was it. It takes a lot of time and money to develop long-haul routes. We've been very aggressive in opening new routes already: Shanghai, Beijing and Tokyo. Our three dailies to Abu Dhabi will become five because on top of Milan, Rome and Venice, we'll offer Bologna in the center of Italy and Catania in Sicily. It means we can offer our customers origin to destination. In the past, it was point to point, but that's not enough any longer. That's also why we need much more sophisticated software. The customer wants a seamless solution. The relationship with Etihad will allow us to have better purchasing power so we can save more money to invest in the marketplace.

What is timing on the new routes?

Most of [Asia will be] this year. In South America, we're looking at Santiago, Bogota and Mexico City. So anywhere where Alitalia can be present, we will deploy. That's the name of the game. San Francisco will be probably the end of '16 or early '17 maximum.

What about on the technology side?

We're spending $120 million, roughly, on technology. We've signed three major deals with IBM, Sabre and SAP because we need to be a smart carrier. Business is moving very fast, so we need a better solution. Distribution is vital. Alitalia did not invest in the last few years, and we have a major deal with Sabre where all the market analysis, [global distribution system] approach, the benchmarking and yield management would be done by Sabre. We need to be in a position where we know we have the best approach to the market in terms of strategic pricing and positioning. On top of this, we're developing applications for younger people. We have a team today in Mountain View, [Calif.], working on a strategic project with Google because you need to be at the forefront.

What will the fleet improvements entail?

We're going to spend $400 million. The first new planes will arrive in June with the new standards. We're going to redo everything, both economy and business class. It will start in June and will be over by the first quarter of 2017. … We'll maintain the DNA of Alitalia but upgrade and update it to feel more contemporary.

Since Etihad came on board, have you seen corporate market share grow?

In the last 18 to 24 months, especially in Europe, Alitalia went through some rough periods, with the issue of whether we'd be able to survive independently. That is all behind us now. We're recontacting all the corporate accounts throughout the world. I'm spending most of my time traveling—Brazil, Japan, here—to make sure that we meet the top trade and corporate accounts. We have an aggressive media campaign, and we will not allow anyone to take market share away from us. We'll do whatever it takes to protect our market share. We do that by developing longer routes, which is a more profitable part of the business, and within Europe, we'll take some very aggressive pricing action against the low-cost carriers when we see it's beneficial to our business. In terms of deployment, we'll have fewer narrowbodies and more widebodies. Competition is fierce. In the States, we have a strong relationship with Delta and we are a part of SkyTeam, and Etihad is helping us in Asia.

Are the LCCs in Europe courting corporate business more aggressively?

They're trying in Europe. EasyJet is trying. It's difficult, but they need to work very hard to make sure they're delivering service. It's a free market, and it will be much more difficult for them. We see an effort to go that direction, but they need to change their nature, which is very complex.

How does Etihad's partnership network fit in with your SkyTeam membership?

It's not in competition with SkyTeam. It's a different concept. Etihad has chosen the path of investing in selected airlines as minority shareholders. They have Airberlin and Jet Airways as the most prominent airlines [to us]. We're going to work very closely with Airberlin to develop intra-Europe traffic against Lufthansa, which is our major competitor. Jet [Airways] is vital because India is a booming market, and we can connect together via Europe. There are no [overlap] issues like with Emirates from Milan to New York, and we don't see any conflict with that.

What do you think of the unfair-competition allegations against the Gulf carriers?

I understand the philosophical issues, but to be extremely pragmatic, there are no 'Gulf carriers.' Emirates and Etihad are very strong competitors. Etihad has chosen a different strategic path to growth, whereas Emirates is organic and is trying to fly anywhere in the world. That is a very sensitive issue. I understand that, but we're focused on what's right for Alitalia.