Auguri, Alitalia

There is a Sicilian proverb that goes: chiu scuru e mezzanotte non po fari, which literally means it can’t get any darker than midnight.

It is an apt description for the circumstances that Italian flag carrier Alitalia now finds itself, having been forced into administration just a day after Labour Day. The airline has debts of about EUR3 billion as of end-February.

The problems are too many to enumerate and have been too long in the making. And, like many of the other major European flag carriers, the unions wield far too much power and influence, limiting the critical changes that management need to perform in order to stay solvent.

But hey, it’s Italy, land of la dolce vita and la bella figura; ah yes, the beautiful figure – a philosophy of life whose meaning remains hard to grasp for outsiders, even for those who have lived there.

The Italians are fabulous at many things: fashion, food, football. They just suck at running an airline. Big time. And Alitalia’s been in dire straits for a long time, kept afloat by successive governments fearful of the loss of jobs, and loss of face. So while Alitalia bled, it nevertheless did so beautifully, elegantly, in true la bella figura style.

Alitalia A319 door

Philosophy aside, what would an Alitalia collapse do to the real Italian economy? Italy’s Industry Minister reckons it would have grave repercussions on the overall well-being of the country.

He’s right. Alitalia’s importance to the Italian economy is quite significant. Last year it carried over 23 million passengers on over 200,000 flights to destinations within Italy and globally.

In terms of core contribution, Alitalia roughly is responsible for about EUR2 billion of Italy’s GDP while nearly 30,000 jobs are directly and indirectly linked to the carrier. But will the bankruptcy cripple the economy? Will Silvio Berlusconi no longer hold “bunga bunga” parties? Of course not!

The airline has already received from Rome a short-term lifeline of EUR600 million to tide things through; judging by Alitalia’s track record that cashpile would be depleted well before Christmas.

There are some striking similarities between the Italian flag carrier and Malaysia Airlines Berhad (MAB). One of the three commissioners selected to manage Alitalia while under administration, Luigi Gubitosi, noted the airline’s costs for leasing, fuel and maintenance were above market rates.

MAB’s short-lived ex-CEO Christoph Mueller made similar remarks on the carrier paying above market lease rates for aircraft prior to his arrival. Between 2001 and 2014, MAB reported cumulative net adjusted losses of MYR8.4 billion. The airline was paying close to half a billion on interests on debts alone before it was delisted.

The similarities don’t end there. Etihad’s James Hogan, he being the guy who bought a 49% stake in Alitalia in 2014 for EUR560 million, just a year ago said the Italian’s turnaround “has been the most radical and the fastest plan…” Not surprisingly, the Arabs have caught on and Hogan will leave later this year.

Not to be outdone, Peter Bellew the current boss of MAB, went on to pronounce (barely three months into the job) that the greatest turnaround would instead be that of MAB. As far as we know, Peter doesn’t smoke, but whatever he may have inhaled during that interview – mate, it’s certainly more potent than any Irish poteen!

Why are airlines such as Alitalia and indeed, MAB – airlines that have persistently siphoned taxpayers’ money – have the gall to demand more bailouts? An Alitalia demise would be painful for Italy, sure, but Italy won’t die. Low-cost carriers such as Ryanair, easyjet and others will very quickly ensure the system will readjust itself. It always does. La vita va avanti…

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