Perennial Basket Case Alitalia is on Brink of Collapse

What do you even say about the mess that is Alitalia?

They’ve been a basket case for years, with powerful unions and a long history of political meddling. Every so often they get a bailout from one place or another. Air France put money in though it was obvious to nearly everyone they’d lose their shirt. They walked away, though leaving the airline even worse of with a joint venture that benefits Delta and Air France more than Alitalia.

Next in line with deep pockets was Etihad, who learned a lesson not to trust promises made by the Italian government and which ultimately pushed out its own CEO in part based on bad investments in foreign airlines. New uniforms, service training for flight attendants, and new business class seats were not going to turn around the airline.


Copyright: jvdwolf / 123RF Stock Photo

Alitalia had lined up additional bailout funds to keep operating, based on a fantasy plan of €1 billion in cost reductions over 2 years, wishing for a 30% increase in revenue, while reducing its narrow body fleet.

This plan and bailout required backing from unions who voted 4-1 against. And frankly I don’t blame them, even though it pushes the airline towards bankruptcy. It’s not unreasonable for them to believe:

  • That a new bailout would be forthcoming anyway, since it has always come
  • The management plan is ludicrous so they’d be back in the same position being asked for more concessions soon enough.


How Long Can They Claim This?

It’s a dangerous game on both sides because the airlines problems — both revenue and cost — are real. It’s been a consistent loser for a long time. Tinkering at the margins will not change that.

As the carrier prepares for a restructuring the best thing for everyone except the current owners and workers (the Italian people, passengers, the aviation industry) would be to let it fail. Europe has Open Skies and other carriers could come in and pick up assets and operate in Italy. Alitalia should be allowed to die, though it’s hard to imagine that actually happening.

In the meantime flight operations continue.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Sabena, Olympic, Swissair, Malev. Let’s add one more.

    And note….air travel still happens in Europe without these folks.

  2. I read that Alitalia only has less than 20% of the Italian market, so from a passenger perspective the impacts wouldn’t be as major as some people claim. It’s more a prestige loss – similar to as if Ferrari would go bankrupt.

  3. LOL…..chapter 11 bankruptcy allowed in USA and used by how many US airlines?!

    Such delicious hypocrisy ftom the yanks (as ever)!

  4. Platy- you need to leave your anti-Americanism at home. Yes USA airlines did file for bankruptcy. The difference is that when they emerged from it, they actually had a plan and are now making money. Alitalia on the other hand, has been saved about 30 times!!! not once!!

    Look at the facts and don’t let your biased views blind you

  5. @ f. constanzo

    The difference (compared with Europe) is that in the USA you have the provision to file for Chapter 11, which allows a company far more leeway to trade itself out of financial disaster rather than giving priority to repaying creditors:

    https://www.forbes.com/sites/hbsworkingknowledge/2013/03/25/how-chapter-11-saved-the-us-economy/#44e8b7a01520

    With regard to aviation, hypocrisy can be found in, for example:

    – Response to competition from the Middle Eastern carriers
    – Claims and counter claims regarding subsidies to aircraft manufacturers (the WTO battles of Boeing vs Airbus)
    – Providing billions of dollars of so-called aid to other countries which is then used to buy US defence product (e.g. $38 billion 10-yr package for Israel)

    Gary himself has covered the contrary aspects of these sorts of issues in this very blog, so no need to repeat the detail here.

    I’m not sure why you think pointing out the obvious makes me “anti-American”.

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