Troubled Italian flag carrier Alitalia loses about €2,000,000 per day, according to a government minister. The solution? Another cash infusion…
Earlier this month, Italy appointed a new administrator, Giuseppe Leogrande, to oversee cost-cutting measures and find a buyer for Alitalia. At the same time, it granted Alitalia yet another bailout. Facing pressure from both the government and from workers, Leogrande will try to make Alitalia attractive to investors like Lufthansa or Delta, who have expressed interest in partnering or even acquiring it.
Italy’s Industry Minister Stefano Patuanelli revealed the startling daily losses that Alitalia has racked up, noting that the €2,000,000 per day is an average, not a set amount each day.
“We are talking about a loss that fluctuates during the year because the cash-flow is completely different in different periods of the year.”
Patuanelli’s statement was actually a clarification of a statement earlier in the week where he mistakenly said Alitalia lost about €2,000,000 per month.
Why It Matters
Ok, so Alitalia loses a lot of money. What’s the big deal? Doesn’t the government always just bail it out anyway?
While the answer to the last question is yes and there is actually no rational reason to believe that this restructure will be any different, this staggering daily loss so clearly demonstrates 1.) why Alitalia can’t find any investors and 2.) how difficult it will be to actually change.
What’s Alitalia realistically going to do to save money? Slashing salaries or cutting jobs will result in strikes, which cost the airline even more money. Cutting routes? Carriers generally find cutting their way to growth very difficult. Selling assets? They’re only so much that can be done and not enough to solve the systematic problem. Growth, including an investment in new aircraft requires large capital expenditures. Print more miles? The MilleMiglia program is already largely worthless and won’t sway discretionary travelers.
In short, I still fail to see a way forward for Alitalia. At the same time, the continued government infusions undermine competitors like Air Italy, who are also struggling but face an uneven playing field on their home turf.
It does take money to make money, though it seems Alitalia is simply burning through it. Even with the government unwilling to let it fail, Alitalia’s poor performance calls out for serious reforms. But is it too late? What can realistically be achieved? I’m stumped.