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.
If AF end up buying Alitalia, and you need to pick a new worst airline – you could do worse than Olympic Airlines.
They used to be called Olympic Airways, but went belly up – the flying operation was then moved to a new airline called Olympic Airlines instead (it all got a bit embarassing when the country was about to host the Olympics in 2004)
They’ve been teetering on the edge for years. The Greek govt gave them state aid more than once – and the EU has ordered the govt to reclaim the money. The ever forgiving (not !) Ryanair have also launched a court case over state aid, making life that bit more difficult for Olympic.
The whole thing seems to just rumble on, while Aegean Airlines and anyone else just tries to gain more market share
I think some govs will always be cool with national infrastructure that loses money. Does/should the US interstate hwy system make a profit? Does/should Amtrak make a profit?
But I totally agree Berlusconi is a buffoon.
P.S. I remember the Italian airline Volareweb. They competed with Ryanair then went belly up.
Volareweb is the low-cost child of Alitalia and is alive and kicking (no idea how far…)
My family and I are flying Alitalia in June and July respectively and returning together. The price difference is significant when multiplied by 4…
So CF, who currently holds the #2 spot in your list of Worst Airline?
Frankly, starting with their unbelievable history of accidents I would have to rank Aeroflot right up there.
Davi – They should definitely be a contender. I may have to have put out a survey to pick the next winner of the coveted award, but let’s see what happens here first.
Bryan – I thought the reason we were in this mess in the first place was because the EU doesn’t allow airline subsidies.
Andy – There’s no question Alitalia bookings have been light and that’s meant there are some excellent deals. Of course, you just have to hope they’re still flying those routes by then.
Jeff K – I don’t know. It’s such a large drop off between #1 and anyone else. I’ll have to think about it.
Jeff K – Not sure that Aeroflot is so bad any more.
Yes, in the early 1990s they were absolutely lousy and completely deserved the bad press.
The chaos in Russia since the 1990s has come under control and many of the little 1-plane semi-regulated baby flots have ceased flying. The crash involving the kid in the cockpit happened 14 years ago.
Aeroflot now fly a significant number of western built aircraft. They’ve even been a member of Skyteam for a few years. Skytrax consider them a 3-star airline (max possible is 5). They’re not the world’s best airline, and they are not about to go bankrupt. There are plenty which are worse.
CF – The EU *does* allow airline subsidies, but there are 2 general principles:
1) A Govt can do whatever it likes, if it can show that a private investor would do exactly the same thing. If a bank lends the airline money or buys shares, the Govt can do the same.
2) If a Govt want to subsidise an airline, it is meant to be a on a once-only basis for restructuring, not for normal operations. The clock runs for a 10 year period, after which a Govt can add some more subsidy. Alitalia got a dose of subsidy in 2001 – the EU will allow more subsidy in 2011
anyone read the front page of this week’s onion? southwest article.
Davi – Thank you for that! Do you have a link to where this is explicitly drawn out? I wouldn’t call the first one a subsidy, but the second one certainly would be. Somehow, I don’t think Alitalia will make it to 2011 in their current state, so the government is out of luck at this point.
Bryan – Talking about this article? I love the Onion, so I asked Southwest for a comment to see if they can take a joke or not. Here’s what they had to say:
“We have several avid Onion readers in our department, so we were pretty tickled to see Southwest in there. I think we all wished they had used one of our names for a quote so we could show off to our friends. The funniest thing is that the graphic looks exactly like the shuttle we use to take Employees from our Headquarters to Dallas Love Field Airport. With the exception of the enormous aircraft on the runway, you could snap a pretty similar photo from Denton Drive almost any day of the week!”
State aid within the EU – there’s a PDF file from the UK Trade Department, meant to explain the EU rules along with links to all the EU Commission sources. Probably more than you want to know, but easy to skim to the bit you want to know about.
Davi – But that specifically says that it does not apply to Transportation:
“What we don’t do
State Aid Branch does not handle agriculture, fisheries and transport aid: the Department for Environment, Food and Rural Affairs and the Department for Transport respectively perform that function.”
The dislaimer for transport mainly refers to when Govt subsidises local bus and rail companies to run a bus service between villages and small towns in rural areas (taking the bus in the UK is regarded as much more normal than in the USA)
In the late 1960s, the rail network in the UK had been built over 100 years and was too extensive – ordinary people were buying cars instead. The Govt needed to trim the network, but tried taking a great big axe to it instead
Caused a major outcry and significant population changes which still rankles today, hence the Govt sensitivity over the issue.
In the 1960s Europe had just finished rebuilding from WWII, and air transport within Europe was still for the wealthy.
Subsidies for airlines rests very much within the normal criteria. Send me an email or get me on MSN and I can explain further.
Correction – there is some official subsidy of airlines in the EU – called the Public Service Obligation.
The EU allows subsidy to named airlines on particular routes within the EU – mainly to islands, and remote areas. Within the UK, this applies mainly to the islands off the NW coast of Scotland – tourists don’t want to go there outside the summer.
Um, I kind of feel out of place with this serious discussion on subsidies and routes and etc etc etc.
Cranky, I just want to know one thing: after everything you’ve written about how much you Looove Alitalia, HOW THE HELL DID YOU GET AN INVITE TO THEIR PREMIER??? :)
You must be one very persuasive individual. lol.
Artie – Well, I got invited by the LA airports people, not Alitalia.
I always enjoy your analysis of the slow-motion train wreck that is the state of Alitalia’s business affairs, but I’ve never heard much about their actual service. Is it as hideous as their business model, or is the “worst airline ever” distinction based on the business/financial situation alone?
Zach – I’ve never flown them myself, but I’m heard uniformly poor reviews from friends who have. So, my designation is solely from a business/financial situation.
I can certainly concur that Alitalia is definitely high up on the list of worst airlines, service is terrible. My feelings on airlines like Alitalia and Olympic is that the sooner the EU market becomes fully open and devoid of government interference the better. Nationalistic sentiments are always best left out of business in my opinion. Sure it is always a sad day for a nation when a flag-carrier goes under, but in the interest of the consumer the best outcome would be for Alitalia to be swallowed up by AF/KL or wound down and allow other carriers to enter the market with a better offering. It would be a milestone in European aviation if the latter was allowed to happen. Instead, it will be a fudge option with Berlusconi saving face as CF predicts.
My experience with Alitalia is that service is certainly not the best, but definately not as bad as its business model would suggest.
Notwithstanding the patriotism or professionalism shown by many people working for national air-carriers, fact is that privatisation is the safest road to a healthy existence – state interference has drugged them down long enough.
As for PSOs, they still exist because they provide a social service to remote areas, serving strictly non-commercial routes. They should not be confused with the now ceased practice of illegal (according to EU law) state subsidies.
…As for the next worst airline ever, I don’t think that Olympic Airlines will be a contender for the title: By the time Berlusconi makes up his mind about whether he wants to go italian or settle for a foreign buyer, the Greeks will have placed Olympic Airlines under the wings of another airline (maybe AF-KLM?), if not of an investor with the vision to give Olympic a future similar of its prestigious Onassis past. (The Greek government is publicly aiming for a settlement with the EU and an international competition for the company by the end of the year)
Alitalia and Berlusconi may have a bit of a problem:
This may of course be code for changing the value of the bid.
As to Aeroflot…
Having been forced to fly Alitalia several times (about 20 Transatlantic round trips and several domestic flights within Italy) in the last three years, I have never had a truly bad experience. The service is not great but is certainly superior to anything in the domestic US.
My daughter and friends will be using Alitalia in June,should I be worried about no airline being their when it’s time to leave?
Bill – Well, my guess is that the government will find a way to keep the airline flying. I´m still out of the country on vacation, so I haven´t seen many updates, but I believe they´re trying to get the right to loan Alitalia money. No matter what, I would be very surprised to see them disappear by June.