Alitalia to merge with Germany? When will they ever learn?

Italy's Prime Minister Berlusconi isn't one to give up easily. His tenacity is renowned, even if his policies don't always cut the mustard. Sometimes they even suit his own cause more than the targets of his friendly actions.

Yesterday, still in search of his "miracle" to save Alitalia from the fate it richly deserves, he announced that following talks with German Chancellor, Angela Merkel, the two countries were "looking very favourably" at a Lufthansa-Alitalia tie up.

Meanwhile, CAI, the investment consortium that is putting EUR1 billion into a set of Alitalia's assets, has reportedly decided to go with Air France-KLM, largely because the cost of doing otherwise would be prohibitive.

But Mr Berlusconi would prefer Lufthansa, as it plans to develop Milan's Malpensa as a hub. That just happens to be the Italian PM's electoral heartland.

Meanwhile, the good (?) news for CAI is that the government has approved the sale of Alitalia's assets to the group and is expected to announce that formally today. Nearly two thirds of the CAI offer is composed of debt, so this will not be all plain sailing. Not to mention the usual recalcitrant pilot and cabin crew unions who are still opposing the CAI acquisition, causing the cancellation of dozens of flights daily.

Of all times to be trying to revive a geriatric airline with one leg tied behind its back, this is arguably not it. Even real airlines are having enormous difficulty surviving in the enormously turbulent economic storm that is raging.

Even if this deal gets up, and whoever it is with, there are going to be many - even apart from the pilots' union - who will live to regret it. Buying CDOs might be a much safer option.

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