PRESS RELEASE MIDYEAR REPORT 2012 CEO ANDREA RAGNETTI SAYS: THE WORST IS OVER, WE ARE TARGETING A TREND REVERSAL IN THE SECOND HALF OF THE YEAR. IN A VERY DIFFICULT MARKET SITUATION, THE ALITALIA GROUP HAS RETAINED ITS MARKET SHARE AND INCREASED REVENUES TO 1,686 MILLION EUROS (+ 4.1%) AND LOAD FACTOR TO 71.1% (+ 3.4 PERCENTAGE POINTS). EBIT (- 169 M EUROS) AND NET RESULT (- 201 M EUROS) REFLECT THE MARKED WORSENING OF THE MACROECONOMIC SITUATION, THE INCREASED FUEL COST AND A STRONGER DOLLAR AGAINST THE EURO. INVESTMENTS IN THE FLEET RENEWAL PROCESS ARE CONTINUING. OPERATIONAL PERFORMANCE IS STILL IMPROVING: ALITALIA S FLIGHT PUNCTUALITY AND REGULARITY INDICATORS NOW RANK AMONG THOSE OF THE WORLD S TOP PERFORMERS. Rome, 25 July 2012 The Board of Directors of Alitalia - Compagnia Aerea Italiana S.p.A. met today in Rome - with Mr. Roberto Colaninno in the chair to approve, inter alia, the Group s consolidated midyear financial accounts after a thorough illustration by the CEO Andrea Ragnetti. In the view of Alitalia s Board Chairman, Mr. Roberto Colaninno, despite an exceptionally challenging macroeconomic scenario, revenue growth will remain a mission for our Group in the next few years. That is why we will continue to invest in service fundamentals and fleet quality. A strong and solid national airline has a value going well beyond national pride and proves now to be a strategic economic asset for Italy as a whole. THE WORST IS OVER AND WE ARE CONCENTRATING ON GROWTH In one of the worst half years in the memory of air traffic insiders, Alitalia has managed to resist better than other European airlines did to the most diversified adverse events, i.e. oil cost at its highest historical levels, an unprecedented appreciation of the dollar against the euro, recession in Europe and to an even higher extent in Italy, which all caused a dramatic shrinkage in demand declared Andrea Ragnetti, Alitalia s Chief Executive Officer. In the latest quarter we worked hard to counter the crisis and prepare ourselves to speed up the pace of our revenue growth in the second half of 2012 and chiefly in 2013. We have continued to renew our fleet for it to be among the youngest in the world by January 2013; we have concentrated on a further improvement in service and operational performance with the ultimate aim of achieving the best on-time record in Europe by 2014; we have shaped our internal organisation with the objective of driving up sales and revenues. The worst part of the year is back. The second half will expectedly perform better the first. Many sacrifices will still be needed and our action will have to be cohesive and resolute; in any case, the trend reversal I expect will set us on a course towards 2013 which, as I said, is likely to bring Alitalia back to operating profit after more than twenty years. THE SECTOR SCENARIO The early six months of 2012 were characterised by a financial crisis that beset the Euro
zone and, in particular, the Mediterranean basin countries, an area whose recession is proving to be deeper and longer than feared. The half year also saw a significant increase in the cost of fuel supplies (whose incidence on the Airline s operating cost was 33% on average). This increase determined a period-onperiod price increase of 7.4% over 2011 (up from an average oil cost of 107.6 dollars per barrel in H1 2011 to 115.1 dollars per barrels in H1 2012, with peaks of 124.5 dollars per barrel). Another factor that negatively impacted on the Airline s results is the 6% strengthening of the dollar against the euro (as opposed to the first half of 2011), which negatively affected not merely fuel purchases but also other costs such as lease fees on non-owned fleet and maintenance costs. THE ALITALIA GROUP COMMERCIAL AND INDUSTRIAL PERFORMANCE In the half-year ended on 30 June 2012, the Alitalia Group transported more than 11 million passengers, with a substantially unchanged result as opposed to the January-June 2011 period (-0.8%). In a general context of market-capacity rationalisation and in order to face a falling demand caused by the economic and financial crisis, the Alitalia Group embarked on capacity optimisation actions which resulted in an overall 3.7% reduction in offered capacity. Alitalia s entrance into the market of long-haul charter flights to tourist destinations in particularly high demand from Italian consumers during winter resulted in the Airline s increase of its transported passenger volume by 195 thousand units, to be considered in addition to the more than 11 million passengers transported through scheduled flights. In the January-May period, the Alitalia Group market share was equal to 22.7% (in line with the level of the early 6 months of 2011) on the three flight segments in aggregate, i.e. intercontinental, international and domestic. Through the introduced changes on offered capacity made possible, inter alia, by the Airline s fleet renewal load factor achieved 71.1%, i.e. significantly above the 2011 level (+3.4 percentage points). Total revenues for the period rose significantly from 1,620 to 1,686 million euros (+4.1%). The driving factors behind this result include, e.g., the development of long-haul charter operations, a strong increase in ancillary revenues, an improvement in Cargo Belly operations (whose revenues increased 6.2%), a load factor rise (+ 5 percentage points), fare adjustments to reflect increased fuel costs in line with the Airline s reference competitors and a more efficient fare-class management. Despite the demand shrinkage, the Alitalia Group inaugurated new routes during the period, in particular through the start-up of Air One Smart Carrier operations in Venice - the new third base of Airline s network - and introduced new domestic and international flights from Milan Malpensa and Pisa. In the first half of the year, Alitalia continued to invest in quality improvements in ground and on-board passenger services through the launch of a new Executive service for high-value customers including an exclusive package of dedicated pre-flight and after-flight benefits. This is indeed a flagship service in Alitalia s offer for the most demanding clientele and an ideal companion to a travel experience in Magnifica, the intercontinental business class.
Magnifica is today a unique, top-raking class of its kind globally, where passengers find lastgeneration full-flat seats which convert to comfortable beds, in-flight meals fully inspired by typical regional recipes (through which Alitalia won the Best Airline Cuisine award of the US monthly Global Traveler for two years in a row), accessories in leading Italian designers brands such as Richard Ginori and Frette and a Bulgari case with an exclusive Airline selection of cosmetics and products. Through a gradual renewal of the long-haul fleet, the Classica Plus a premium economy introduced by Alitalia on its intercontinental routes is now available on flights from and to Japan, Argentina, Brazil and Venezuela. FINANCIAL POSITION AND PERFORMANCE Italy s economic and financial situation and the impact of negative scenario factors as outlined above drove down the Alitalia Group s financial performance indicators, i.e. EBIT and net result. At -169 M, EBIT was 101 million euros below the level of the first half of 2011, whereas net result closed at -201 ml., down 107 million euros from H1 2011. On 30 June, net financial indebtedness was equal to 862 million euros, up 8 M from 31 Dec. 2011 (854 M ), with a 658 M indebtedness share of the owned-aircraft fleet. Midyear total liquidity including unused credit lines amounted to 367 M, increasing 41 M over the level at 31 Dec. 2011 (326 M ). OPERATIONAL PERFORMANCE In terms of operational performance, in the January-June period, the KPIs for service quality and reliability retained excellent levels. On-arrival punctuality was 88.9%, up 0.9 percentage points vs. the same period of 2011. On the Rome-Milan route, Alitalia recorded a punctuality rate of 93.9% for flights on arrival (+0.2 percentage points vs. the same period of 2011). Today Alitalia is among the top-ranking airlines in the word for flight punctuality, with a rate well above the average of the AEA (Association of European Airlines) member airlines (82.5% is the measured AEA average punctuality on arrival). In 2009, the average punctuality of Alitalia flights was 73.7%, which placed Alitalia only at no. 23 among all European carriers. Over the last three years, unswerving efforts were made in operations to achieve this result which, however, can still be improved. This is the rationale behind Alitalia implementation, as a pioneer worldwide, of a new integrated information system named CAMS (Connection Analysis Management System) easing the management of transits at the Rome Fiumicino hub. By integrating 7 different operating systems and making them able to intercommunicate, CAMS handles information in real time and improves the efficiency of handing and support operations on passenger boarding and disembarkation, and luggage loading and unloading. In the half year under review, the flight regularity indicator was at 99.5%, down 0.3 percentage points due to the exceptional snowfall having affected the Rome Fiumicino hub and many airports in central and northern Italy in February. Net of the effects of these exceptional events, the regularity indicator would have otherwise reached 99.9% of flights, or plus 0.1 percentage points against the first half of 2011.
The rate of mishandled luggage claims also improved, with 92.3% of claims closed positively (luggage found and delivered to customer) within 48 hours as opposed to 87.7% in 2011. In the context of the Customer Care Management strategy (one of the key priority projects for the Airline with an increasingly high focus on customers needs and quality of service), an important project was initiated in June for a more efficient and innovative customer care service. Alitalia is among the first-ranking airlines in the world to provide its crews with a Motorola XOOM 2 tablet device containing all information on high-value customers, for their immediate recognition by cabin attendants and service customisation in accordance with their requirements thus improving in-flight experience. FLEET RENEWAL AND FUEL MANAGEMENT POLICIES In the early 6 months of 2012, the Group s fleet renewal process continued with the phase-in of 14 new aircraft including long-haul Airbus A330s and short-to-medium haul Airbus A319s and Embraer E-190s and E-175s. As on 30 June, Alitalia s operating fleet included 154 aircraft. Cabin reconfiguration in 10 long-haul Boeing B777s into the 3 new travel classes for intercontinental flights (Magnifica, Classica Plus and Classica) ended on 30 June, 10 days in advance of the deadline fixed at the project start. Alitalia s fleet renewal process will continue throughout the year with the phase-in of another 10 aircraft including Airbus A330s, Airbus A319s and Embraer E-175s, bringing the total figure of fully new aircraft to 59 at the end of 2012. By the end of this year, the phase-out of the old MD80s will also be completed. By 1 Jan. 2013, Alitalia will have a fully new or renewed fleet, among the youngest (6.5 years of average lifetime) and the most efficient in the world (through a reduced number of aircraft families) with an added plus, i.e. a low impact on the environment. To cope with the increasing oil cost (cost item number one in the Airline s accounts), similarly to the majority of airlines, one year ago Alitalia started to implement a package of fuel-saving practices and was also one of the few world carriers to invest in a Fuel Management incentive scheme involving more than 2 thousand employees of the operational areas. Through the high professional profile of Alitalia s pilots, this new policy places the Airline among the best performers and is intended to reward the virtuous behaviours and practices adopted by its staff in order to optimise fuel consumptions by reducing waste and increasing savings whenever possible, without overlooking that the Airline s main objective is flight safety. ALITALIA S STRATEGIC OBJECTIVES AND OUTLOOK FOR THE NEXT FEW MONTHS Since 2009 Alitalia has chiefly focused on rebuilding its operational efficiency, quality of service and a competitive cost position, as key requirements given the permanently critical macroeconomic scenario. The strategic objective for the next 3 years is to speed up revenue growth by the development of a commercial policy enabling the Airline to generate resources for the benefit of the Group s operating results and investments in further development. The outlook for the second half of the year is one of cautious optimism. Through a natural improvement of seasonality, the cost-containment measures already
implemented and those to be introduced in the months to come, the second half of 2012 will expectedly exhibit an appreciably better operating result than the first. H1 2012 H1 2011 Variation Transported Passengers 11,125,000 11,200,000-0.8 % Load Factor 71.1% 67.7% + 3.4 p.p. Revenues in M 1,686 1,620 + 4.1 % Operating Result (EBIT) in M - 169-68 - 101 Net Result in M - 201-94 - 107 Full A15 network punctuality 88.9% 88% + 0.9 p.p. For press communication: Antonella Zivillica Alitalia Media Relations Manager Tel. no. 06-65638950 Mobile no. 335-1449843 Email: ufficio.stampa@alitalia.it