As OMAAT reported earlier, Alitalia’s employees have just voted against a so called austerity measure. This means that the airline will possibly run out of capital soon, which in turn means the airline may close. Although not a certainty, there are very few options out there for the struggling carrier. Lucky put it well when he mentioned that no government wants to be responsible for creating 12,000 unemployed people, as well as losing a national icon. The issue is, how can you sustain hemorrhaging money?
There are a few options that I think can happen to save Alitalia. The airline has funding from Etihad, who at the moment is not doing very well economically. This could possibly mean they will sell of their stake, it’s better to have some money than no money. Without the backing of Etihad, the airline will probably find itself against the wall. Fear not, I think there are a few ways that the airline can be saved.
International Airlines Group currently owns Vueling, which has a strong presence at Rome FCO airport. This could make it easier for IAG to merge Alitalia into Vueling. That being said, it would mean a lot of cost cutting, layoffs, and transformation. I can visualize Alitalia becoming a medium and long haul only carrier, with Vueling taking over its short haul routes. This would be similar to the proposed changes by the originally rejected contract. It would strengthen Vueling in the Italian market, and allow Alitalia to focus on its more profitable routes.
IAG would be a good fit for Alitalia as well. With a partner in the US as American (if they do join the IAG-AA joint venture) it would give them stronger access to markets there. This would mean forfeiting their Skyteam membership and abandoning Delta. I don’t see that as a major issue, given Delta has not paid too much attention to its struggling Italian partner. This for me, is the most likely scenario.
Qatar Controls the Italian Market
Qatar Airways recently purchased a part of another Italian carrier: Meridiana. If the airline wanted to cement its mark on the Italian market, they could purchase Alitalia, and merge it with Meridiana. This would mean Meridiana would take over all of Alitalia’s leisure routes, and possibly its regional routes. Once again, Alitalia proper would focus on the long haul network it operates right now. This could be a functioning partnership, but I would caution Qatar Airways to notice the mistakes done by Etihad. Alitalia would likely also join oneWorld, and work closer together with American, IAG and Qatar. This scenario could lead to more political backlash, and I don’t know if Qatar Airways has the money to spend on buying Alitalia right now.
Miracles Do Happen: Liquidity
The least sensible, but most probable scenario, is the injection of capital by Italian banks. Although the country is in no position to give out money, it may become an issue of national pride and avoiding losses. There seems to be a sense that Alitalia can become profitable in the future again, but this seems far fetched. If the banks inject money into the airlie, I would do it the way the IMF gives out money: by demanding changes. If the airline wants money, the employees would need to agree to the original contract they rejected. I think it is the only reasonable way a bank could risk funds like that.
It would break my heart to see Alitalia go. I think that the employees were foolish in rejecting the contract, even if the contract had chimeral aspirations. I hope that the airline can restructure itself in a way that will allow it to stay afloat. However, I don’t think they will be able to do it alone. If the airline partners with Qatar, IAG or some mystery buyer, there are better chances of it surviving. Only time will tell what will happen with the struggling Italian carrier.
What do you think? What will happen to Alitalia? Will they be rescued or will they fade into the sunset? If they are rescued, who will rescue them?
All images from Wikimedia Commons unless otherwise noted.