Once again, it has been way too long since I checked in on Alitalia. I mean, there’s been plenty of action for my favorite airline to hate, but of course, nothing has actually happened. It’s all more of the same.

What prompted me to write this time? It’s Alitalia’s annual depressing shareholder meeting. Alitalia’s latest Chairman Aristide Police said that they were screwed, basically, unless everything magically goes well unlike anything that has ever happened before. In true Italian fashion, shareholders made loud and ridiculous claims that the airline needed an exorcism or that the senior managers should be stripped of their Italian citizenship. Um, yeah. That’ll help.

But really, things are just bad all around. The EU remains hot on Alitalia’s tail, and has launched an “in-depth investigation” of the loan from Italy. Yeah, this could get ugly if they decide it’s illegal (and it’s surely illegal).

But wait, there’s more. Why focus on Alitalia’s management when it’s almost always the Italian government pulling the strings and making things worse. Let’s just look over to Italy’s fearless leader, Silvio Berlusconi, for a little entertainment.

I think Alitalia will need to find accords with international partners and … Air France could be a good solution

Arrrrggggghhhh!! I hate you, no wait, I love you. No, I hate you. Ok, maybe I kind of like you. Really, will this fun ever stop? I hope not. It provides me with way too much entertainment.

That was a couple weeks ago, and now I think it’s safe to say that ship has sailed (though I guess you never know). Apparently, the airline has one last shot for salvation, and it ain’t the Pope. Intesa Sanpaolo is an Italian bank that has been appointed adviser to Alitalia. It is supposed to come up with a plan to save this wreck, and it should take at least another month before they even have the chance to sift through the airline’s messy books.
So for now, well, nothing has changed. *sigh*

Man, this has been a busy week. I know I spent half of it lounging around Peru, but long vacations always make it harder to catch up on work when you return. Combine that with the fact that I’ve got a new job at PriceGrabber (Director of Community), and I’m just struggling to make it to the weekend. So, let’s get to what I missed in the international world and I promise I’ll have some more extensive stuff ready for next week.

Nationwide Goes Down - It’s not just US airlines that are dropping like flies. Looks like Nationwide Airlines out of South Africa is the latest casualty. To be fair, these guys didn’t really have their stuff together in the first place. I mean, they were grounded last year when a friggin’ engine fell off one of their planes. When something like that happens, it’s not easy to recover. They didn’t.

Virgin Atlantic Thinks You’re Pretty Enough - At least half the time someone brings up Virgin Atlantic, it’s quickly followed by a mention of the inflight massage and manicure. Of course, that was only available in Upper Class, but now it’s not available anywhere. Virgin has decided to kick the beauticians off the plane. So, you’ll have to get a massage or manicure beforehand. I know, rough life.

Neeleman Has Only One Name Idea - You’ve started a successful low cost carrier named JetBlue, and now you’ve moved on to found a Brazilian airline. What should you call it? Well, the plan was to have a naming competition, but that ended with the name Samba, and apparently he didn’t like that. So he went with choice #2 - Azul. Yep, that means Blue in Portuguese. Geez, so creative.

Alitalia Grabs Illegal Loan - Ah, my favorite subject. Italians are now 300m euros poorer since the government decided to loan Alitalia the money to keep the airline afloat. Of course, it’s already been challenged by the EU, and Italy has to somehow justify how this is legal. Good times.

I know you guys have been champing at the bit, waiting for an update on the latest with Alitalia. I’ve actually been wanting to write about this for a little while, but I figured I’d wait until I went to last night’s launch party at LAX for the new LAX-Rome service. It was a surreal event; like hanging out on the Titanic while half the ship is already under water.

As for the event itself, it was a relatively nice and simple affair over at the always fantastic Flight Path Learning Center. The food and Peroni were good, and they handed out a few freebie tickets on the new LAX nonstop. I think the highlight was when Alitalia’s North America head said that the current situation made it seem like Alitalia should be on Jerry Springer. At least he has a sense of humor about it. I actually felt sorry for some of these guys. So what exactly is the latest?

When we left off last time, Alitalia had accepted the AF/KL bid and even the government had gotten behind it. But, they still needed to get the unions to back the bid. Um, that didn’t happen. And even worse, the Italian government fell apart. Without the approvals they needed, AF/KL walked away, but I’m sure they’d come back if all the other parties decided to stop acting like children.

In the election for the new government, Alitalia, the symbol of national pride (what a horrible symbol), was one of the top campaign issues. Silvio Berlusconi, the man that the Economist called “unfit to lead a modern democracy“, campaigned on the idea that he could prevent Alitalia from falling into non-Italian hands.

Sadly, he won.

So now, not only are the unions against AF/KL, but so is the government. Let’s be clear here. Berlusconi talks a big game. He’s said:

Many businesses, including big ones, have come forward to guarantee the necessary capital for a completely Italian team which, once it knows the accounts of Alitalia, will be able to present a bid.

Um, no. Or, somebody will come forward, but it won’t be even close to being as attractive of a bid as the one from AF/KL. Really, AF/KL is the only true hope for this company to survive, and Berlusconi is beating his chest, acting proud, and sounding like a complete idiot. Of course, he has to cave, but not until he can save some face. Just yesterday, he said:

As concerns the Air France hypothesis, if we went back to the initial project for Alitalia which gave the same weight to Alitalia as the other two airlines as well as being Italian orientated, I would be happy to discuss the possibility and once I take office I will speak about this subject with President Sarkozy.

See, he’s starting to change his tune. You know what’ll happen next. He’ll get a couple of concessions and then he’ll let AF/KL buy the airline. Then he’ll try and look like a hero even though he’s doing nothing good.

I guess I should be happy about this. When AF/KL is allowed to take them over, it’ll probably mean I’ll have to find another “Worst Airline Ever” to pick on. I’m just going to enjoy this for now.

You might think that I’d be sad to see Alitalia accept the Air France/KLM takeover bid but you couldn’t be more wrong. The fun is really just beginning.

When I was in school, I remember the guys from TPG coming in to talk about takeovers. They said there was no company too awful to take over. Even the worst companies could be attractive, as long as the price was right. I’m pretty sure Air France/KLM followed that school of thought when they made their bid for Alitalia.

AF/KL offered 1 share for every 160 outstanding shares of Alitalia. That values each share at about 10 euro cents, an 81% discount over the closing price on Friday and still two and a half times its closing price today. Over the weekend, the Alitalia management team voted to support the bid, so why is it still valued above that level? Because somebody must think this deal may not happen as is.

I wouldn’t be so sure that we’ll see much movement. AF/KL was pretty clear here. That’s what they’ll pay, but they’ll still only do it if the government, unions and EU all back the bid. Everyone who thinks that’s going to happen, raise your right hand. Now, raise your left hand and slap yourself in the face. Getting everyone behind this bid is going to be virtually impossible.

The infrastructure minister of Italy aid, “This is a proposal aimed only at creating profit for the bidder, that is harmful for the company, for the workers and for the country.” Despite those feelings, the government did come out in support of the bid on Monday. But that’s the easy part. Let’s see if they can get the backing of whatever government wins the upcoming elections along with some important local politicians (Milan’s government, for example).

But before that happens, it’s time to convince the unions to play nice. Will it happen? What does this picture of some union members tell you?

The unions were apparently so up in arms over possible job cuts that the members were even throwing eggs right before the arrival of AF/KL’s chief exec. Like I said, the fun is really just beginning.

[Photo Credit: Dario Pignatelli/Reuters]

It’s been a month and a half since we last checked in on Alitalia, and I feel bad. I try not to neglect my favorite airline to hate, but it looks like that’s been the case. So what’s new? Nothing.

Ok, so a lot is new, but the theme is the same. The situation gets worse and worse every day and there’s no end in site. But let’s get caught up on the details.

The Italian government did finally decide to pick the Air France/KLM deal as their favorite, so the two airlines entered into talks. Then, the Italian government collapsed. Oh boy. There’s lots of speculation that the collapse of the government means that this deal is in trouble, but we really don’t know. The players all deny that this will hurt anything.

So how bad are things for the airline? Really bad.

It looks like they need 750 million euros by the middle of the year just to survive on their own, or at least that’s what they say. They continue to lose over 1 million euros per day, but at least they’re making some real changes this summer.

The word is out that they’ll reduce flights to Milan from about 660 per day (that sounds high, but it’s what the article says) to only 75. This is part of their recovery plan, and it’s consistent with what Air France/KLM would do - focus on the Rome hub.

How are they rewarded? The operator of Milan airport is suing them for 1.25 billion euros in damages for pulling out of the airport. Are you freakin’ kidding me?!? Sadly, no. They say they made a bunch of investments in the infrastructure of the airport for Alitalia, and now Alitalia owes them if they pull out.

If I’m running Alitalia at this point, I’m just planning on grabbing some grappa and drinking myself silly until I forget about how absolutely absurd this is. Even if they do something right, they get hit with backlash. Someone please shut this airline down.

Poor Alitalia. No seriously, I really do feel bad for them. I know they’re completely incompetent and losing millions of dollars a day, but I still feel a little sympathy. See, even if they could run a functioning airline, they wouldn’t be allowed to do it thanks to the meddling of the Italian government.

In last week’s episode, we were down to two bidders, but the final decision had been delayed. Then yesterday, we had big news. Um, the final decision has been delayed again. Now it’ll supposedly happen on Dec 21, but I wouldn’t put bets on it. Why?

The Italian government can’t keep their grubby hands to themselves.

We have two offers here. Air One, the Italian airline, will pay 1 euro cent per share (basically nothing) and then spend most of its money on fixing the airline and merging into it. Air France will pay 35 euro cents per share, but they won’t pour as much into the airline. They also say they’ll make Milan a regional hub and focus their efforts on Rome flying. Air One hasn’t made such claims.

The reason everything has been delayed is because the government is dragging its feet. In fact, there’s a top level meeting between the Italian and French heads of state to discuss things on Thursday, and you know this will come up in their talks. But why should it? It’s a business that should be allowed to run like a business. You know that’s not the case when you hear what some of these guys are saying.

Take yesterday’s Reuters article, for instance. On Monday, the Deputy Prime Minister Francesco Rutelli said, “Alitalia must propose the best partner, but the government also has a responsibility … It is not about necessarily choosing an Italian airline, it is not a nationalistic issue. But the interest of the country is at stake. Where will our children, our firms leave from to go to China or India? Will they have to fly from Paris, or even Frankfurt, or will they be able to leave from Milan or Rome?”

Somebody get this guy an economics text book. If there’s demand for flights between Rome and China or India, you know there will be nonstop flights there regardless of who owns the airline. If there isn’t demand? Well then there shouldn’t be a flight there, and if you force one, it will end up being an unprofitable mess. You’ll be right back where you started.

In this article talking about the delay, Rutelli was at it again. “I do not say an absolute no to a partnership with Air France or other foreign partners, but I say that if Air France wants to sit at the table, it has to act in Italy’s interests, rather than its commercial interests.”

Arrrrggggghhhhhhhh!!!!!!!!!

Look, genius, of course Air France has to act in its commercial interests. Why else would they be doing this? Do you think a single Air France shareholder is going to say, “Gee, I don’t care if we make money as long as we’re doing it for Italy.” If you do a good job of making your country a center for commerce and tourism, people will go to/from there. And if there’s demand, airlines will gladly fill it with nonstop flights. But if you have no demand, why on Earth would any airline fly it? So, spend your time furthering your country’s ability to be a desirable place for business and tourism, and then there will be enough demand for flights.

When it comes to Alitalia, just take the bid that makes the most sense from a financial perspective and get out of that mess as soon as you can.

I’m not sure why, but I’ve had a lot of trouble coming up with post topics this week. Maybe it’s a slow week, or maybe work has just been too busy. Either way, today I’m just going to fall back on my old standby . . . Alitalia.

Today, Alitalia received word that of the three expected bidders, only two will make the bid: Air France/KLM and Air One.

Now they have to choose from those two bidders, and it’s not the greatest choice. On the one hand, they have Air One. It’s a small Italian airline that may not be up to the task of integrating the larger, very debt-heavy airline. But, the government could make the most money from them, and yes, the airline would remain Italian.

On the other side, we have Air France/KLM. This is not a stupid airline, so you know they’ve low-balled the bid. I’m reminded of the guys at Texas Pacific Group saying how they’re always interested, it’s just a matter of price. That means of course that the worst of companies may find that TPG is only interested if the price is $1. I’m guessing Air France/KLM is thinking of something along those lines, though not nearly as extreme. The government makes less money, but they may have a better chance of getting an airline that works eventually.

That leaves Lufthansa as the odd man out. They just decided it was a bad idea. Duh. I’m sure they’ll sleep easier tonight.

Now the Alitalia Board will meet to decide which offer they like best. When they choose in the next week or so, they’ll enter into exclusive negotiations with the hope that they’ll get this done by the end of the year.

No.

Sorry, I just couldn’t resist. It’s once again been a little while since we checked in with our favorite incompetent airline, Alitalia. I hadn’t planned on doing a post on Alitalia today, but I was reading a post in Leif Pettersen’s excellent travel blog Killing Batteries that started out like this:

F*cking Italy!!!
OK, OK… Let’s just calm down and try to discuss this like rational, levelheaded F*CKING ITALY!!!!!

Naturally, that made me think it was time for another post on that airline I love to hate.
So, what IS new with these guys?

Not much. The airline continues to bleed money while others are generating loads of cash. They just continue to be the laughing stock of the European industry. (And let’s remember, they have an airline in Europe called Wizz Air so Alitalia has to be bad to wrest the laughing stock title away.) The government is still trying to sell the airline. After the last privatization attempt failed, they went back to the drawing board. I’m pretty sure what they wrote on the board was, “Must privatize airline” and then decided to try it again. Now, they’ve asked for non-binding declaration of interest from potential suitors. It was supposed to be due on Nov 30, but surprise! We found out yesterday that it slipped until Dec 5. But don’t worry. Italy’s transport minister said it won’t slip into 2008. Uh huh.

So which masochists are involved this time around? Italy’s Air One is still in the running. They’ve been the only one to show consistent interest in trying to save this mess. But now, the other two showing interest according to “government officials” are Lufthansa and Air France.

Air France has been rumored for a long time but they’ve really never shown a formal interest. Italian workers would certainly feel at home with the strike-loving French, but they might be frightened away by an airline that actually makes money.

Lufthansa, on the other hand, hasn’t been mentioned very much. This would surely see Alitalia defect into the Star Alliance. Hmm, something about German (Lufthansa), Italian (Alitalia), and Japanese (ANA) interests uniting in an alliance makes me a bit uncomfortable . . . .

Anyway, they keep saying this will be done by Christmas. Who wants to take bets?

I have to pick my car up from the shop tomorrow morning, so I thought I’d put my post up tonight instead. It’s amazing, but I actually do get email if posts don’t go up at the usual time. So, here you go . . . .

You always hear misguided governments argue that they need to prop up failing airlines. I’m not quite sure why that is, but combined with other government intervention (including the proposed passenger bill of rights which I don’t support) this probably helps explain why this industry will never be healthy for long periods of time. Something that happened over the last couple of weeks will hopefully help governments understand why coddling isn’t necessary. (I can always dream, right?)

Fortunately for me, it involves the airline I love to hate . . . Alitalia. I wrote a couple weeks ago about how Alitalia’s latest turnaround plan would involve significantly slashing flights at its Milan hub and moving them to Rome instead. Well, you know the government is freaking out about losing all that service in such a major city. But guess what? Where there’s demand, other airlines will come in and fill in the hole.

This time, it’s Ryanair to the rescue. Soon after Alitalia announced its retreat from Milan/Malpensa, Ryanair said it’ll come in with 12 planes based at the airport operating flights to 50 international and 10 domestic destinations within a couple years.

See, if there’s enough demand for service, when one airline goes, another will follow in its place. You argue that Ryanair doesn’t have the same level of service as Alitalia? True. But if enough people want full service, you can bet other airlines will come in and fill the need.

This has happened time and time again. Remember when Southwest set up shop at Chicago/Midway the day after Midway Airlines went under? And how exactly did Atlanta end up being the biggest airport in the world after losing Eastern Airlines almost 20 years ago? Delta and AirTran picked up the slack.

If airlines aren’t healthy enough to survive, governments should let them go. Don’t try to prop them up. Those airplanes will still exist and someone will pick them up and start flying them if there truly is demand. And if there isn’t demand? Well that would probably explain why the airline wasn’t doing well in the first place.

Woohoo! It’s time for an Alitalia update. You know how much I love these guys for their incredible ability to do just about everything wrong, and of course, nothing has changed.

The latest news is about their “survival/transition” plan according to ATW Daily News. I was really hoping that the end was near for these guys, but you knew that wouldn’t actually happen. Now they have a super duper plan to fix the airline. Shall we take bets on how long it is before this one fails? Actually it’s probably safe to say it’s failed before it even started.

The new plan revolves around the airline’s two hubs in Rome and Milan. They’ve now decided that two hubs don’t work. So they’re slashing flights out of Milan in half and bumping up Rome flights. They’re also consolidating cargo operations at Milan. Other than that, it’s not entirely clear what they’re doing. It seems that they’ve had their managers enroll in Glenn Tilton’s “How to Speak in Circles and Say Absolutely Nothing” class. Here are some gems:

• The airline is “no longer able to sustain the negative trend of accumulated and perspective losses.”
• The survival plan is meant to achieve “conditions of sustainability and continuity for company activities in the short/medium term.”
• It will suspend flights with “strongly negative economic results and with no prospects for recovery in the short term.”

Wow, that’s good stuff. But if they’re going to suspend flights that have a negative economic result, they aren’t going to have any flights left.

Please note that at not one point in that article or this one does the the airline mention job cuts. They talk about cutting routes and cutting airplanes but not jobs. There’s no question they need cuts, and maybe they’re planning them, but they’re probably too scared to say it. Why? We all know what happens when they threaten cuts. Strike!

And that’s exactly what the pilots are up to now simply in anticipation of what’s to come. They’re staging a “work-to-rule” protest which means they’re being overly cautious above and beyond the norm. Basically, they’re doing everything strictly by the book and they’re not in any hurry to do it. This is similar to what happened to United back in the Summer of Hell in 2000. Yesterday, 18 flights were canceled after 83 were canceled the Thursday/Friday before.

Many say that the government is just trying to dress up Alitalia to make it look pretty for a suitor. I just can’t believe that any suitor would be that stupid.