Alitalia - Back from the Grave

Like the monster from a cheap horror movie, Alitalia reared its ugly head on Haloween.  The threat this time is that the negotiations to implement what everyone signed up for in principle broke down, and over the past couple of weeks, the battle has been joined once again.  Most of the main unions are more or less going along with the plan, but as before, the pilots and flight attendants aren't, and have already started causing disruptions, with Rome's Fiumicino airport apparently being quite a mess at the moment.  Furthermore, there are apparently divisions within the ranks of the pilots - some don't want to strike, some do.  The only certainty is that chaos will prevail.

In further Alitalia news, the European Union officially cleared the deal, although they did stipulate that the company has to pay back the 300 million Euro loan.

Alitalia: All Aboard?

The latest this weekend was the news that the pilots' union signed up, leaving only the flight attendants to sign the agreement, which at this point seems highly likely (Update: they signed). The only big question left is: who will be the foreign partner in the deal, Lufthansa or Air France?

So it looks as if all the drama and many "deadlines" were simply part of a high-stakes game of chicken. Now that an agreement has been reached, everyone can get back to the real business of Alitalia: milking Italian taxpayers.

What is the bill going to look like?

• All of Alitalia's debts, which are extensive. The good bits go to the wealthy "entrepreneurs" behind CAI, the "new Alitalia".

• A monopoly on the lucrative Milano-Rome route, since Air One, Alitalia's only main competitor, is part of the deal. The government, to help facilitate the deal, has agreed to suspend anti trust laws for the immediate future.

• I haven't found an authoritative source, but reports are that some of the people who will be let go will get up to six years of pay. I'm all for the government helping people out of a tight spot, but in a country where many people in their late 20ies or early 30ies work for a pittance (salaries as low as 800 euro a month or 15000 dollars a year, for qualified, college educated workers are not unheard of), and receive nothing if they are let go, that kind of spending on unproductive workers is a slap in the face.

Worst of all, the whole thing is highly indicative of just how things are run in Italy, and that absolutely nothing has changed or improved. Italy has a great deal of talent and resources to offer the world, and millions of intelligent, hard working, honest people. However, once again, they are overshadowed by sleazy politicians, entrepreneurs who make money through dirty politics deals rather than genuine innovation, and intransigent unions who pretend to speak for "the workers", but are in reality a privileged few who are afraid of real meritocracy.[...]

Alitalia: Another Day, Another Deadline

There's still no deal, no collapse, nothing certain, but since one more union signed up to the deal offered by the "courageous entrepreneurs" of CAI, Alitalia is still flying, despite having had Thursday as a "deadline". There are a few more unions still holding out: pilots, flight assistants and a few others. The new deadline is for Friday. At this point, I wouldn't put much faith in "deadlines" or "rules" or "laws" regarding Alitalia. If they're uncomfortable, it's best to simply sweep them aside or otherwise ignore them.

Air France was reported to be interested in buying up a 10-20% stake in the new company (CAI). The position of the foreign airlines that keep sniffing around is clearer: Lufthansa and Air France are being played off one another. Both of them would probably rather that Alitalia fails, and they get to buy up slots, airplanes, workers, and so on, in an open, transparent process. However, if the deal comes together, and there's no room to rush in and buy up stuff on the cheap, there's still probably money to be made, and neither airline wants to be the one left out, so neither one really wants to jump in 100%, and keep the thing alive when it would be better off dead, nor back away completely, giving up any chance were the deal to go through.

Something being talked about a lot these days is the "national pride" of having an Italian airline owned by Italians. This sort of attitude might have flown in the 1930ies, when airplanes were a big deal, but in 2008, in case no one had let the "national pride" crowd know, having some airplanes with an Italian flag on them is no longer really anything to brag about. Here is a list of "flag carriers" from wikipedia: http://en.wikipedia.org/wiki/Flag_carrier. Kyrgyzstan, Mozambique, and even failing Zimbabwe have national airlines. Who cares? Italy has plenty to be proud of, where it's either unique in the world (its history, its art), or for genuine accomplishments on the cutting edge. Ferrari immediately comes to mind, as do authors, artists, actors, scientists... people who accomplish novel and innovative things. Food, something everyone is proud of in Italy is something that's been exported worldwide. Italy acquitted itself well at the recent Olympics, in terms of sports. All things to be proud of, and perhaps even spend some government money to accomplish. But in terms of airplanes, the important thing is for people to be able to fly to, from, and within the Italian peninsula and islands, not that the guy getting rich from the operation happens to have been born in the same country.

On Friday, we ought to know the results of the negotiations between the pilots and CAI. Were that to work out, the deal will probably go through, and Berlusconi's smiling mug will be all over the TV networks (many of which he either owns or controls) explaining how he valiantly saved Alitalia. What people in Italy won't hear on his TV networks is how much of their money he threw away to accomplish this. And nothing will have changed. The deal will be neither the first, nor the last to see everything stitched up so that the entrepreneurs get richer without risking much, those in cushy jobs keep them, the Italian taxpayer's money goes down the drain, the rule of law is ignored, and what should fade away to be replaced by something stronger, cheaper, faster and better never does.[...]

Alitalia: The Fat Lady Still Hasn't Sung?

Well, if not her, Berlusconi is still talking up a storm. The latest "deadline" is supposed to be tomorrow, Thursday, after which Alitalia will stop flying. Of course, these "deadlines" don't have much credibility, but sooner or later there will be a real one, and this one looks to have some force behind it. As a consequence, negotiations are still going on, with Berlusconi himself quite involved in trying to cut a deal. The latest:

• Berlusconi insists that Italy will and must have a national airline. Much as fish need bicycles, in my opinion, but to each his own... except Berlusconi, who gets some of yours, too. In any case, he doesn't want to "talk publicly" yet, in order to keep negotiations going. He might be up to something, or his "not ready to reveal" could be like the "group of entrepreneurs" that he more or less invented during the election, only to finally twist enough arms to create the group once he'd won the election. Berlusconi continues to reaffirm that the company must remain Italian, and is willing to spend a lot of other people's money in order to make it so. Actually, he didn't say the second part, but it's pretty much a given at this point.

• Lufthansa, which had said "we'll pass", is apparently still interested, but with the condition that there isn't some kind of open war between the unions and the new company. Foreign airlines have got to be a bit nervous about this whole business: the best result for them would be for the whole enterprise to fail, and thus be able to buy up airport slots, airplanes, and hire up any people worth hiring on a case-by-case basis. Still though, they're probably still sniffing around, because were the whole thing to actually come together, the "new Alitalia" will need an international partner, and there's likely some money to be made there.

• In order to show that the left is just as clueless as Berlusconi, their leader Walter Veltroni sent an open letter with three ideas for what direction things ought to take:

  1. CAI, the "new Alitalia", should move closer to meeting the unions' demands.
  2. The government should actively seek out foreign firms, with or without the "new Alitalia", interested in purchasing the company.
  3. The government should conclude negotiations with the union in order to make it possible for CAI or a foreign company to buy Alitalia and thus allow it to survive in some form.

  I guess they wanted to show that they were capable of "leadership" too, where leadership is defined as "willing to throw lots of other people's money at a problem that isn't really that much of a problem in the first place". What they ought to be doing is to make sure that those who lose their jobs, and their families, are in some way taken care of, retrained if necessary, and otherwise helped through a tough time, rather than trying to keep Alitalia lurching along like some kind of Frankenstein monster. And while they're at it, they should try and even out those rules so that anyone who loses their job, whether they work for a big company or a little one, gets the same treatment. [...]

Alitalia Endgame: Odds and Ends

Today's Alitalia news:

As mentioned yesterday, Alitalia has finally gone ahead and started trying to sell off the good bits in something akin to an auction, something that should have happened a long time ago. At this point, it's going to be pretty dicey to put much together, as the deadline is the 30th of September, and with world financial markets in turmoil, many investors may be a bit wary of getting involved with anything having to do with Alitalia. "3-4" days of flying left before the airline is grounded is one number being bandied about, but none of the deadlines set so far has come and gone with any real changes in operations, so I'd take it with a grain of salt.

According to the Corriere della Sera newspaper, some of Alitalia's assets have been seized in Israel, in order to pay for debts the company owes local airports.

Berlusconi continues to rant and rave about the unions ruining his deal, and while he's probably right in terms of the proximate cause for the negotiations' collapse, it's sort of like the camel herder shaking his fist at the straw that broke the camel's back: there is a lot that went wrong over the years, including Berlusconi's making a mess of the Air France deal, which was far better from a financial point of view, for the Italian taxpayers.

Another development is that some of the Alitalia personnel want to put their own money towards buying up the company, which is certainly more courageous than the entrepreneurs, but just as likely to end up badly, as hard choices that need to be made will be that much more difficult if the pilots and other staff have any kind of veto.

Meanwhile, Fiumicino airport sounds like it's a madhouse, with opposing groups of employees demonstrating: the "si`" group who wants a deal, and the "no" group who don't, being kept apart by the police. [...]

Alitalia: For Sale, Cheap?

Unless something happens behind the scenes with negotiations between the unions and the "good company" CAI (the "courageous" entrepreneurs who kindly offered to buy all of the good bits of Alitalia), it looks like the "good company" has been ditched at the altar.

With less than a week to go, Alitalia is going up for sale, according to news reports, although as of this writing, the announcement that is supposed to have gone up on the web site isn't there yet. Berlusconi, in a true spirit of an open, competitive market, said yesterday that CAI is the "only alternative". That's probably true at this point, given how the whole deal was carved up for their exclusive consumption, rather than simply putting Alitalia's assets up for auction in an attempt to recoup as much money as possible for their creditors, which include the Italian taxpayers. Perhaps that will finally happen once the airplanes are no longer allowed to fly, but until then, and perhaps even afterwards, we're going to be seeing a series of "really, truly, finally, this-time-we-mean-it, last-ditch, hail mary" attempts to stitch things together between CAI and the unions.

One ray of light in this dark mess is that the government will not nationalize the airline, which would have continued the farce indefinitely.

What still isn't clear from what I've read is what the unions hope to gain by telling off CAI. They certainly made those of us who want to see the whole thing implode happy, but given that their careers are on the line, that seems like slim pickings. Some of them may have hoped for nationalization, but that's apparently completely off the table (although I would never say never with Alitalia). There's talk of another airline like Lufthansa or Air France getting involved, but I can't imagine they'd want to deal with the stinking carcass of Alitalia; better to wait until it's really, truly dead, with a silver stake through its heart, and buy up the good bits piece by piece, and hire up people they need one by one.[...]

Alitalia: the other shoe drops?

The group of investors who were ready to sweep up all the good, productive, moneymaking parts of Alitalia (being a businessman with government connections in Italy is sure a tough job) appear to have withdrawn their offer after they failed to come to an agreement with unions:

http://edition.cnn.com/2008/BUSINESS/09/18/alitalia.financial.trouble/index.html

The latest, in Italian, from the Corriere della Sera.

Like the monster in some horror movie, though, it seems that Alitalia always manages to claw its way back in action. Wounded gravely, it staggers inexorably towards the heroine - can anyone stop it?

Of course, amongst everyone involved, the blame game has started: Berlusconi says it's all the union's fault, the unions say that it's the politicians' fault, and so on. I'm not sure exactly what game the unions are playing, as they are facing unemployment in short order, so a reduced salary would have been better than nothing. I suppose they thought it was worth it to sink what was such a bad deal for everyone but the wealthy groups who were being offered the nicest bits of Alitalia without having to deal with the garbage. In any case, it's quite two-faced of Berlusconi to talk about playing politics with the company's fate, when that is precisely what he did to help sink the Air France offer.

I'm cautiously optimistic that this time, events may have finally conspired to hole Alitalia below the waterline. Unfortunately, this will still lead to taxpayer debts, but after the Air France offer was withdrawn, that was pretty much a given. Hopefully at this point, the good bits of the company will be auctioned off to pay Alitalia's creditors, and the whole thing will finally be laid to rest, opening up the Italian aviation market for fitter, healthier, more productive and less strike-prone companies to jump in.[...]

Alitalia: Chicken, or Wile E. Coyote?

Monday, supposedly the day when flights would start being canceled has come and gone. It's now Tuesday evening, and things still appear to be running. Negotiations with the unions are still going on, even though they appear to not be going well. The situation is likely to be one of these, but only time will tell which:

• Chicken. Knowing that time is running out, both the unions, the government, and management are all playing the game of "chicken", seeing who blinks first. Without staff, the airplanes and airport slots are no good, and without a place to work, being a pilot or airport worker isn't that great a position to be in either. In this version of things, someone will blink, and a deal will be reached "just in the nick of time", and everyone will celebrate screwing the Italian taxpayers once again, with some of the denser fans of Berlusconi thinking he's actually done something good for the country.

• Wile E. Coyote. Remember the cartoons where the coyote, chasing the road runner, would run off a cliff, stop, look around, look down for a moment, realize he was on thin air, and only then plummet to the ground? The risk is that Alitalia, like the coyote, will somehow claw its way out of the crater it makes in the ground, and continue to be a drag on Italian aviation. It would be worth it to see the coyote look on Berlusconi's face, but I fear that the "chicken" scenario is more likely.[...]

Alitalia/union talks at an impasse, beginning of the end of operations

As of Monday the 15th, it looks as if Alitalia might begin to cease operations. Talks between the unions and the "new Alitalia" have not been going anywhere, and the airline simply does not have the cash to go on. The differences between what the unions want and what the new Alitalia is willing to offer were apparently so great that the unions are willing to "pull the trigger".

Berlusconi has, of course, declared that the stalled negotiations are "politically motivated", although after the mess he made of the Air France/Alitalia negotiations, one couldn't be blamed for thinking "live by the sword, die by the sword". Of course the unions aren't blameless either, and one wonders what sort of future employment many of the workers think they're going to get, sans Alitalia, and if it's in any way comparable to what they have now. Perhaps the "new Alitalia" would even be better off hiring up people individually rather than as a union, en masse. Truth be told, that sort of outcome would have been better years ago: Alitalia goes bankrupt, and other companies rush in to fill the void, hiring up the workers at market rates.

The upshot of all this is that next week, Alitalia will start running out of money for fuel and other operational necessities, and it's probably impossible even for Berlusconi and company to shovel more government funds into the company without finally falling afoul of the heretofore relatively toothless European Commission. Already, the situation is rapidly precipitating, with protests at various airports and canceled flights.

Perhaps the best hope for the Alitalia deal is direct intervention from "Above". The pope, when asked to say a prayer for Alitalia prior to embarking on a flight for France, said that he'd been praying for the company for some time.[...]