Another roadblock is emerging in the turnaround of Alitalia. The European Commission, which needs to okay the reboot of Alitalia, is setting conditions to approve a government bailout. But Alitalia employees, including airline crew, say this will take too long. Instead, they want the Italian Government to move sooner rather than later.

Italian Government busy trying to negotiate Alitalia reboot

A report today in Reuters suggests the Italian Government is in a quandary. On one side, they have the European Commission, which has the final say on Alitalia's future. On the other side, local employees and other stakeholders want decisive action from the government.

After years of turmoil, the state-supported airline went into bankruptcy in 2017 for the second time in a decade. It was reportedly losing US$2.2 million per day and had debts of around $3.6 billion. Alitalia was then 49% owned by Etihad, another one of that airline's ill-fated investments.

At the time, the Italian Government declined to renationalize the Alitalia. The government's position has since softened as the national carrier almost stopped flying. In 2020, the Italian Government moved to take control of Alitalia as part of wider economic measures to prop up the Italian economy.

The Italian Government has since set aside $3.61 billion to haul Alitalia out of bankruptcy. But it's not so straightforward. The European Commission has to approve any state-funded bailout. It has approved some monies since 2017, but it is balking at signing off on $3.6 billion.

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European Commission sets down conditions for Alitalia

In a letter dated January 8, 2021, the European Commission set out four conditions before considering allowing the bailout. Alitalia's assets needed to be sold via a "transparent, non-discriminatory and unconditional tender." Aviation, maintenance, and ground handling businesses need to be disposed of. Some slots at busy airports need to be surrendered. Finally, the Alitalia brand should go. The preferred new name is ITA, short for Italian Air Transport.

The problem is, among other things, this will all take time. Alitalia employee groups and other stakeholders say there's no time left.

Italy's National Air Transport Federation (FNTA), a federation of three Iocal airline unions, wants the Italian Government to transfer Alitalia's assets to a new company as soon as possible. FNTA also wants Alitalia's name and identity retained.

While the European Commission is not known for its cost-effective or easy solutions to any problem, it could prove to be Alitalia's white knight. For decades, the Italian airline has labored under costly inefficiencies, continually appeasing unions and political interests. In doing so, the airline became known worldwide as perpetually broke and always a paycheck away from collapse.

But by forcing through some structural changes, the European Commission may finally force Alitalia (or ITA) to become a better run and more efficient airline.

Does Italy even need an Alitalia?

Alitalia's long-running woes and the European Commission's role also raise broader questions about the need for European national airlines. If we are all part of one big pan-European community, do we all need our own airline? Especially those badly run and out-of-money airlines.

Alitalia's employees and Italy's Government would probably say we do. Given Alitalia's history of avoiding collapse, the odds the airline will manage to scrape through this latest mess. But for how long?

Meanwhile, the Italian Government is stuck between a rock and a hard place, trying to keep everyone happy.

What do you think? Should the Italian Government be bailing out Alitalia? Should the European Commission be laying down conditions? Post a comment and let us know.