The fat lady is still singing: Alitalia's tragedy may yet have a happy ending


So often in tragic opera the heroine will manage incredibly to squeeze out one last aria after being stabbed in the heart. But neither Verdi nor Wagner would have dared stretch credibility to the limits of the tragi-comedy that is Alitalia. The (very) Italian flag carrier has seemingly been sucking in its last breath almost on a daily basis this month. Yet somehow she is still singing. More muted of voice but, incredibly, still breathing even while other, more sustainable models have exited stage left.

Yesterday, after playing a form of brinkmanship that is only too common in Italy's workplace relations, four of the airline's major unions agreed to terms - still not totally clear, but which appear to retain their separate roles in any revived entity. That is not good news, but there were apparently sufficient concessions made to allow white knight CAI to return to the table with its offer, injecting EUR1 billion into Alitalia, but demanding the reduction of up to 6,000 of the airline's current 18,500 staff.

In turn, Italy's regulatory authority, ENAC, seized on this development to somersault on its previous insistence that it would have to withdraw Alitalia's operating licence. The pressure for ENAC to have done so was almost palpable. So Alitalia lives, for the weekend at least.

What is it about this airline that makes it worth saving? It has hardly made a profit in the 60 years of its existence; it is renowned for offering less than world's best service; it has a clutch of ugly unions whose only distinction is their ability tenaciously to hold onto outdated and often ridiculous work practices; the logical reasons for its demise are endless. Yet still it remains, the sub-prime element of southern Europe's airline industry.

But, unlike the independent airlines which have recently failed, Alitalia is a political icon and political heads are threatened if it collapses entirely. Prime Minister Berlusconi merely needs to be able to say that he has performed his promised "miracle" by ensuring that the airline name and, at least a shell of the original remains, to be able to say he has delivered.

But what will in fact be delivered even if a deal is now stitched up? And will CAI be left holding the baby if Air France-KLM cannot subsequently be locked in to a 15-25% shareholding?

Two things are certain about any deal concluded under these circumstances, with all the various pressures that have preceded it: there will be nuances of uncertainty sure to emerge later; and the very fact that it is concluded will generate a torrent of ill will and resentment that will take months if not years to wash out.

Certainly the Franco/Dutch group would be embarking on a venture with echoes of the economic sub-prime mess that is sweeping the world, if it were to sign a blank cheque to gain privileged access to Italy's aviation market. Alitalia may remain in name, but to allow the style of the old model to survive is simply asking for trouble.

Yet, before the standing ovation for Sr Berlusconi, there are still some unresolved pieces to place. In particular, the pilots' unions have not yet conceded the necessary ground and will be using their holdout position to retain the status quo, now they hold the casting vote. There is still another chorus or two left. But even when the curtain falls, the chances are high that it will only create yet another unwieldy and essentially unsustainable operation.

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