Alitalia Loses Altitude

Alitalia could go bankrupt within a week, and Italians can’t be too sad to see it go. The demise of their flag carrier, so prone to labor strikes and political interference, could mean blue skies for competition — and Italy’s flying public.

It’s been all storms for Alitalia, which has been losing €1 million to €2 million a day and is reaching the end of its reserves. Yesterday, the airline’s bankruptcy commissioner said that most of its money will be used up to meet payroll this week. The deadline for new offers is next Tuesday.

The government, which has been trying to sell its 49.9% stake in Alitalia, says it won’t bail out the company; EU rules preclude such a lifeline. The airline’s most-recent last chance was probably a €1 billion offer from Compagnia Aerea Italiana, or CAI, a consortium of businessmen whom Prime Minister Silvio Berlusconi banded together to buy Alitalia and merge it with the country’s No. 2 carrier, Air One.

Three of Alitalia’s nine unions voted to accept the plan, which called for the carrier’s unprofitable units to be liquidated, about 3,200 of its 19,000 workers to be laid off, and the remaining employees to have their hours increased and pay decreased in line with European industry norms.

But the pilots and some other unions balked. In keeping with the strategy that no salary is better than a lower one, now they stand to be jobless. Even more incredibly, in voting down the CAI bid they reportedly turned down a severance package for the laid-off workers of 80% pay for eight years. Italy’s militant trade unions have long fought labor-market deregulations that would have made it easier for the unemployed to find work by reducing job protections. This time they bit themselves.

The deal’s undoing is also a major embarrassment for Mr. Berlusconi, and no politician here could be more deserving. During this spring’s campaign, he promised an Italian white knight for Alitalia if voters would put him in the Chigi Palace for the third time.

His pledge helped to undermine a share-swap bid this spring by Air France-KLM that valued the carrier at €139 million. There’s little reason now to believe that Air France-KLM, or any other airline, would rebid for Alitalia. It still has attractions, such as profitable routes from airports such as Rome and Milan, and coveted slots at hubs like London’s Heathrow. But competitors would probably find it better to wait for Alitalia to disappear, and then move to fill the transportation void.

Italians have seen Mr. Berlusconi’s previous promises, such as lowering taxes and slashing the bloated public sector, crash and burn. At least with this latest failure, the public might end up better off.

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