Thursday, 23 May 2019

The curse of the Olbia public service obligations for Air Italy in Sardinia

Photo Air Italy
The on again - off again public service routes to Olbia operated by Air Italy are now off again as the curse rumbles on and on and on.

Air Italy operates two public service routes to Sardina, one to Olbia from Rome and one from Milan Linate to Olbia. On March 12th, Air Italy offered to fly them without financial compensation from the government. Air Italy didn't gain the first initial phase of the PSO tender but sought to protect its staff of 500 there and the 50 years of service to Sardinia.

Of course, flying these routes without the compensation is a costly affair,  the routes, with more than one airline operating them simply don't attract enough customers to make them independently financially viable. Flying the routes under the terms and conditions as laid down by the Region Sardinia is not financially profitable, and so to ensure mobility and access to Sardinia, the Regione subsidises the routes.

Then on April 8th, Alitalia also offered to operate the Olbia routes without compensation. This was a major surprise, not only to Air Italy, but also to so many involved in the Italian aviation industry. Alitalia is a company in extraordinary administration, it is up for sale, yet so far no buyers have come forward. How therefore it could offer to fly the Olbia PSO routes without compensation remains a mystery. Interestingly enough, Alitalia only offered to fly the Olbia PSO routes without compensation, yet remaining happy to accept the Cagliari and Alghero PSO funds - these routes are far more profitable.

On April 15th, President Christian Solinas convened Air Italy and Alitalia to try to find a solution. Several options were put forward, including sharing of the routes, yet none proved to be financially sustainable, each resulting in fact in an even more negative position for Air Italy than that which had already been proposed by the firm in March – meaning they had to walk away.

On April 17, the Ministry of Transport and the Regione Sardinia once again requested Air Italy and Alitalia to jointly seek a solution to overcome this situation. Over the following weeks, an outline agreement was discussed and developed in which Alitalia would fly the routes until the end of May and support with the reprotection of Air Italy’s passengers, after which Alitalia would exit and hand over the routes to Air Italy, and Air Italy would support with the reprotection of Alitalia’s passengers.
Photo Air Italy

This outline agreement was drafted, revised by both sides and was awaiting signature, however, a few hours before the expected conclusion of the agreement, Alitalia reverted saying it was no longer possible and that they wished to go back to the original proposal of a shared approach to the routes. This was, is, and will be, simply not possible, Air Italy tried to explore every possible option. For more than two months the airline continued serving the routes at a significant financial loss. Air Italy has reserved and cancelled and reserved and been forced to cancel again wet lease aircraft, damaging its partnerships in the process. The airline had also booked and re-protected its passengers using all available options. Teams have attended every meeting called and yet still an equitable solution is nowhere in sight. 

Exactly one month ago Air Italy said that the solution adopted by the Regione Sardinia in concert with the Government was not a solution, but a farce, and one that did not solve the question of Territorial Continuity. Instead, it puts it at risk, and simultaneously risks passengers travel plans, the territory, the personnel of Air Italy and the Sardinia tourism industry. Today Air Italy's management says that statement still stands.

The airline warned, "As it stands, this is the end of the road for us, and we are now forced to cancel the two Olbia routes and will continue to protect those passengers who might still be booked on flights between Olbia and Milan Linate and between Olbia and Rome Fiumicino. There is nothing more that we can do at this time. We have been holding aircraft waiting for a resolution, but unfortunately, now those aircraft are being released and all related agreements will be cancelled."

Air Italy is now proceeding to assess the possibility of claiming compensation because of the way the whole process was handled and it is asking the European Commission to investigate this debacle.

Yet what this all means for the 500-plus Air Italy staff and their families is unclear, it all depends on the decisions of the Region Sardinia and the Government. "They must now move immediately to find a suitable solution to protect the livelihoods of our 500-plus staff and their families in Olbia, and the vital economic and social contribution that they make to the island of Sardinia," said Air Italy. 

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