Unconscious, pitiful, there is no shortage of adjectives to describe the Italian government’s latest outburst in what is now the Alitalia “dossier”.

To secure the vacations of millions of Italians, the government announced Saturday, May 6, 2017, a bridge loan of 600 million eurosto the airline that was hours away from bankruptcy.

A look back at the history of an airline that failed to exploit the tremendous potential of the Italian market.

A failed merger attempt with KLM

This is not the first time the Italian national airline has experienced difficulties. Long before the creation of the SkyTeam alliance, Alitalia initiated an attempt to merge with KLM as early as 1996: a few joint ventures were created, the first in Europe, to share costs and revenues of the Italy-Netherlands traffic… But faced with the lack of efficiency of the Italian airline’s operations and marketing, KLM unilaterally broke its commitments in 2000, and paid the consequences, having to pay Alitalia 250 million euros in compensation for this rupture.

Despite this rupture, Alitalia tried to merge with KLM in 2001… Without success, KLM merged with Air France a few months later…

Air France-KLM could have taken over Alitalia…

Despite Alitalia joining the Skyteam alliance, created by Air France, Delta and Korean Air, Alitalia continues to suffer from its structural difficulties in the mid-2000s.

Above all, it does not anticipate the attack on its long-haul network by the ME3 (Emirates, Etihad and Qatar Airways) and its medium-haul network by low-cost airlines such as Ryanair and EasyJet, as well as by another domestic airline, Meridiana, and WindJet (since disappeared).

In 2006, the company suffered a catastrophic year and initiated a restructuring of its capital. Faced with the inability of the State to transform the company, Italy resigned itself to privatize Alitalia, but the number of candidates for the takeover was very low, with candidates withdrawing progressively.

A second privatization attempt was initiated in 2007, and this time several European majors applied, including Air France-KLM, Lufthansa and Aeroflot.

The Air France-KLM offer was accepted by the Italian government, but following a change in governance, Air France KLM took the opportunity to withdraw following statements by Silvio Berlusconi, who deplored the low sale price of the company to the French group.

The failure of the second privatization attempt led to a purely national solution: a new airline was created from the merger of Alitalia and Air One (Air One having been born from Lufthansa Italia, a company created by the German carrier to counter the Italian national airline on its domestic market), with Air France KLM taking 25% of the airline and sending experts to audit and transform Alitalia, in particular on its production of seat-kilometers.

Etihad, the savior?

But the difficulties continued to grow. Alitalia has the production model of a European major, but a difficult domestic market due to the low purchasing power of the Italians and a cut-throat competition.

In addition, the double-hub at Rome Fiumicino and Milan Malpensa undermines the hub-and-spoke effect that has helped European airlines thrive.

So, at the end of 2014, Etihad Airways took control of the Italian airline with the aim of making it the Gulf carrier’s strong arm in Europe, joining forces with Air Serbia, again with the aim of supplying the Abu Dhabi hub.

Despite massive investments by Etihad, Alitalia’s situation is still critical at the beginning of 2017, with an abysmal debt of 3 billion euros and employees who massively and repeatedly reject the safeguard plans proposed by the management.

Bankruptcy barely avoided, but for how long?

On April 25, 2017, Alitalia was placed in safeguard procedure by the Italian government, a sign of an upcoming judicial liquidation. Despite the rumors, no European player is ready to put a single cent in Alitalia.

Nevertheless, like a leaky perfusion, the Italian government granted a bridge loan of 600 million euros to the airline at the beginning of May, probably to preserve the paid vacations of the Italians.

But is it reasonable? At first glance, no, not at all. A shock is absolutely necessary to rebuild a company from scratch, like Brussels Airlines and Swiss, which were able to rise from the ashes of Sabena and Swissair, victims of competition from their neighbors, and in a group. Can this group be Air France KLM? Yes, but not without a significant amount of cash. And after an in-depth reform of the Franco-Dutch group, which has not yet been achieved…