Navigating the pandemic: Alitalias GC on the challenges facing the aviation industry

In this podcast, Heidrick & Struggles’ Giulia Iuticone speaks with Paolo Quaini, group general counsel at Alitalia, the flag carrier and largest airline in Italy. Quaini, having worked in various sectors, shares his insights on how his diverse set of experiences across industries has helped him perform better. He also discusses the challenges the aviation industry has faced during the COVID-19 pandemic and how companies should prepare for atypical risks, and stresses the importance of having sustainability as a pillar of the airline’s business strategy moving forward.

Some questions answered in this episode include the following:

• (1:12) You have worked in different industries in your career. How has this influenced your development as a leader?
• (4:27) What leadership skills have been essential to you and your team in order to thrive?
• (9:10) On top of policies and procedures, as a general counsel, how has the crisis changed overall demands of your role?
• (12:40) What is Alitalia’s future-forward strategy?
• (14:41) What challenges do you foresee for the industry in the next five years and how are you preparing to face them?

Below is a full transcript of the episode, which has been edited for clarity.

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Giulia Iuticone: Hi, I'm Giulia Iuticone, a principal at Heidrick & Struggles and member of the Corporate Officers Practice. In today's podcast, I'm talking to Paolo Quaini, group general counsel at Alitalia, the flag carrier and the largest airline in Italy. Paolo joined Alitalia in 2017 after a few years as group general counsel at OTB. Before that, he was group general counsel at Cementir, senior attorney at Parmalat Group, and legal department director at Techint. Paolo, welcome, and thank you for taking the time to speak with us today.

Paolo Quaini: Thanks for inviting me. I'm really delighted to be here with you today.

Giulia Iuticone: You have worked in different industries in your career. How has this influenced your development as a leader?

Paolo Quaini: I consider myself pretty lucky to have had the opportunity, in my almost 20 years of experience as in-house counsel, to attend in different business sectors. As you already mentioned, first plant-making, then food, then construction materials, then fashion and, finally, air transport. I believe that all of these have enriched me enormously in terms of experience because each sector has its own peculiarities and from each I have taken away lessons that I was then able to put into practice in my subsequent experiences. Just to give you an example: from the plant-making sector, where business mainly consists of manufacturing large industrial plants around the world, I developed a deep focus on compliance and anti-corruption safeguards, which turned out to be very useful, even in sectors less sensitive to these issues. By the way, this principle works, not only from the cross-sector perspective, but also in different types and kinds of companies—I’m thinking listed companies versus family businesses, or B2C versus B2B, and even here [at Alitalia]. To give you an example, the experience I accumulated in the field of governance-listed companies has proved to be very useful in the reorganization of the corporate governance of family businesses.

I just said that I consider myself lucky—lucky, in particular, to have met HR directors and CEOs who have never considered industry region as a condition for hiring. Unfortunately, in Italy, there are still many companies that have a sort of siloed approach and do not understand that, in reality, coming from a different sector is not an [experience] gap. On the country, it's a strength for the GC because the company will be able to draw on his or her diversified know-how and benefit from how much the GC has learned in his or her previous experiences in other industries.

Giulia Iuticone: And what are some cons you see in moving from one sector to another?

Paolo Quaini: Well, of course, there is a transition phase, particularly if you do not know the business at the beginning. You just have to listen to the others and be humble. When you’re new in an organization, you may want to show yourself as an expert, that you I know everything, and so on. But this is, of course, wrong. If you are coming into a new sector, you just have to be humble. Listen, take your 100-day period, and then everything will be fine.

Giulia Iuticone: What leadership skills have been essential to you and your team in order to thrive?

Paolo Quaini: You probably know that in the past four years Alitalia has navigated being under Extraordinary Administration, which it entered into in 2017. It might seem like a paradox, but I do believe that the fact that Alitalia employees, including, of course, our legal team, were coming from three years of external administration at the time of the COVID-19 outbreak—coming from a full-blown and permanent crisis situation—has been very helpful in managing the pandemic crisis. Of course, this might not be true for the company as a whole and for its business, because the business was already struggling at the time of the outbreak of the pandemic and, for sure, that gave it the final blow.

It's important to remember that in a matter of weeks, in March 2020, air traffic went down to almost zero, which meant almost zero turnover for the company. But, from a people perspective, our legal team as well as the other functions were already used to working in an emergency and stressful conditions. Each member of the team was used to performing his or her role with maximum flexibility and interchangeability. So, to answer your question, I do believe that our previous experience in crisis and emergency management has been the extra gear and a factor for us being able to support the company in navigating the pandemic.

Giulia Iuticone: We’re talking about 2020 with difficulty, it having been a complex year for everyone. How have last year’s challenges supported the refocusing of your priorities as general counsel?

Paolo Quaini: What we understood was how a crisis can affect the organization, particularly when it’s not the kind of crisis that is codified under the operation of the company. Normally, the occurrence of a crisis makes companies realize that they are not prepared for managing it, and COVID was no exception. Even more infrequent are companies that adopt procedures to prevent the occurrence of the crisis. Most companies just address the typical risks of the business they carry out. Of course, it also depends on the exception nature of the crisis, but most of the time, the attention of companies and their procedures turns more on how to manage a crisis once it is revealed that how to prevent the crisis in the first place. At most, training and risk monitoring are contemplated but they are not prevention tools, they are only a way to prepare to face the crises. And COVID, for instance, taught us that our regulatory system at Alitalia was not so sophisticated and exhaustive. Or rather, it was, but only in relation to possible crises codified in the company's operations. For example—airlines don't like talking about it, but of course, the typical risks of an airline are plane crashes, hijacking, terrorist attacks, and natural disasters. And of course, an airline is very much prepared to face and to manage those kinds of crises. But a key lesson we learned from COVID is that we need to review our policies and procedures on crisis management in order to make them suitable for preventing and facing risks that are not codified for us, such as sanitary risks, because these uncodified risks are equally dangerous for a company like ours. This will also be a priority for me as GC and head of regulatory affairs in the months to come.

Giulia Iuticone: On top of policies and procedures, as a general counsel, how has the crisis changed the overall demands of your role?

Paolo Quaini: During the first lockdown in March and April last year, Alitalia played an important role in Italy, bringing home thousands of Italian citizens who were abroad at the time of the outbreak. We converted some of our passenger planes into cargo transport for medical supplies, masks, respirators, and anything else that was needed. That was in the very beginning, and we are still affected now because passenger traffic is very low and mostly limited to domestic flights. So, in this uncomfortable and complex environment, my team and I have been called upon, first to verify and interpret the regulatory measures that have been implemented by both the national government and the EU authorities. You will remember that there was a period last spring when new regulations were being added every week. As the legal department, we are called to interpret and read [these regulations] and basically provide the guidelines for our operations and units and then, of course, overall, to protect the corporate interest.

Another problem we had to face was that we had to reconcile the corporate interests with fulfilling passengers’ rights. At the time, there were plenty of flight cancellations or denied boardings or complaints from passengers and, of course, this was a large number of jobs for us to handle once the first, frantic phase of the emergency have been overcome—measures had been taken, the management of the COVID risk had been stabilized, and we became fully operational.

Another activity we have been occupied with in recent months as a legal department is renegotiation of contracts. Of course, COVID-19 is a factor that can lead to forced maturity, and so what we try to do is renegotiate on equitable basis. The business contracts of the company that are no longer needed or were exorbitant due to the lockdown, to give you some examples, included aircraft leasing contracts, onboard catering, and airport handling services. Abroad, things were even more difficult because the pandemic did not arrive in all countries simultaneously. So, we were discussing [these contracts] with people in countries that were not yet affected by COVID, therefore they simply did not understand our problem. And it was also due to the different regulations. But I have to say, it has been a very tough and consuming period for us.

Giulia Iuticone: Thinking about becoming operational again, as you said, and looking ahead, what is Alitalia’s future-forward strategy?

Paolo Quaini: As you might have read on the on the news, currently Alitalia is in a transition phase between the Extraordinary Administration and ITA [Italia Trasporto Aereo], which is new, established by the state to own and develop a new Italian airline. So, it’s easy to say that it will be up to the top management of Italy to define the future strategy of the airline. Personally, I think that one pillar of such a strategy will have to be sustainability.

Sustainability, depending on the industry, has become or is becoming a real priority for businesses. In the aviation sector, we should say that sustainability is slowly becoming a priority. Today, I don't think it still is. Aviation has traditionally been considered a dirty industry, and it is. To give you some examples and some numbers, the aviation sector is responsible for about 2% of all CO₂ produced by humankind, and emissions have grown exponentially in the last six or seven years. In Europe, for instance, emissions have grown by 25% from 2013 to today. The long-haul plane flight consumes between 80 and 240 liters of jet fuel per minute. So, this is a trend that will necessarily have to be reversed in the coming year. And I think that the air transport sector will have no choice but to align with the general trend that sees sustainability as a real priority for companies in the next 5 to 10 years.

Giulia Iuticone: What challenges do you foresee for the industry in the next five years and how are you preparing to face them?

Paolo Quaini: The answer is easy, but how to get there is not that easy. I believe that the main challenge for the aviation sector in the next five years is definitely to exit the crisis generated by COVID-19 and to bring air traffic back to the levels of 2019. It won’t be easy or quick for the aviation sector to emerge from this crisis. We are starting to see shy signs of recovery, but it's still a long way off.

Furthermore, it will be essential to restore the confidence of passengers. Today, flying is seen as a risk, due to the fact that there is no [way to social distance] in an aircraft. Here, I believe that the COVID-19 vaccine campaign will play a role. Then we must also change our habits: smart working has made us find new ways to meet, as in virtual meetings, and so we do expect to see a decline in travel for business purposes. The industry will have to address this issue. Of course, we hope for a return to pre-COVID normality as soon as possible because, in the end, human contact still remains something that we as social animals need. Fortunately, while business meetings can also be done remotely, holidays, at least for the time being, cannot, and this is where we have to look for our customers.

Giulia Iuticone: Closing on the positive note, what's the most important way your organization is building on the lessons of 2020?

Paolo Quaini: Compared to the other crisis situations we’ve faced, I think that the new factor introduced at the organizational level by COVID is, for sure, smart work. The pandemic has resulted in deep change in the way we work. Our company immediately adopted and continues to adopt smart working, but we were not prepared to do that—that was not something Alitalia was used to doing before. Now, the vast majority of our employees, including our legal team, are working remotely. We have, of course, people still working in person, referring to the flight operation personnel, of course. But beyond the initial difficulties, I think smart working has brought benefits to both the employee and the employer. Of course, managing day-to-day needs and resources has generated some additional complexity compared to the traditional mode, but overall, our experiences have been positive, and I believe that smart working will be a tool that our company will keep using, even if it’s to a lesser extent in the post-pandemic phase. I think that incorporating smart working on an ordinary basis—beyond the COVID crisis—into the mission of the legal department will certainly be one of my top priorities as a general counsel.

Giulia Iuticone: Paolo, thank you for making the time to speak with us today.

Paolo Quaini: Thank you, it was a real pleasure.

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