Arrivederci Alitalia?Alitalia is bankrupt again. This time perhaps it’s terminal

WHEN employees of Alitalia were offered the chance on April 25th to vote for pay cuts and redundancies to save the troubled airline, they spurned the opportunity. In some ways it is difficult to blame them. After all, in the past they have been able to rely on the Italian government to come to the rescue of the country's flag carrier. 

That may not happen this time. Alitalia has lost billions of euros over the past decade. (Indeed, over its 70-year history its accountants have barely had need for a black pen.) The firm had pinned its hopes on a €2bn ($2.2bn) capatilisation plan. But that had been dependent on workers accepting cuts that were negotiated by the government and recommended by trade unions. With the workers’ no vote, that cash is now off the table.

Alitalia has been here many times before. In 2008 it was placed into bankruptcy after plans for a sell-off were blocked. In 2014, with the airline on the verge of failing yet again, the government helped broker a deal with Etihad, a Middle Eastern superconnector, which took a 49% stake. A plan to make Alitalia profitable by 2017, however, proved wildly optimistic. Bloomberg reports that the carrier’s share of the Italian market fell to just 18% in 2015, down from 23% in 2008; passenger numbers have fallen from 30m to 22m in a decade. With its high costs, it has struggled to compete with budget carriers on short-haul routes. Ryanair, an Irish airline, now has the largest market share in the country. On Alitalia’s few remaining long-haul services—particularly to America—it must now compete with Emirates, which picks up passengers in Milan on its way from Dubai to New York, and Alitalia's partners in the SkyTeam alliance, Air France/KLM and Delta.

The chances of a reprieve this time around look slim. The Italian government says it will not countenance nationalising the firm, making bankruptcy likely. That does not necessarily mean that the airline will disappear. But if the firm avoids liquidation, an administrator will be given the power to sell many of its assets. A much smaller carrier will emerge. Luca Cordero Di Montezemolo, the firm’s chairman, says it is to begin the process of naming an administrator shortly.

The loss of the airline would be a blow to national pride. The carrier first flew in 1947. It the papal airline of choice; Benedict XVI, offered prayers for it when it went bankrupt in 2008. The fate of up to 12,000 jobs also hang in the balance. For that reason a taxpayer-funded bail-out should not be discounted entirely; the government might yet blink first, as it has done so often before. It has already agreed a bridging loan of €300m-€400m, to keep Alitalia aloft in case a buyer can be found (although why any firm would want it is anyone's guess). But, having already spent around €7bn since the 1970s trying to keep the firm from crashing, it seems patience has run out. The time may have come to park Alitalia in the hangar for good.