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Italy’s Alitalia crisis

The news gets little better for Italy’s ailing Alitalia. The Italian state airline saw the number of passengers it carried in the first half of 2008 fall 16 per cent compared with the same period in 2007.

European airline chiefs point to the depressed state of the aviation market. But it is telling that the Italian carrier’s plunge in traveller numbers was the steepest of all 35 airlines that make up the Association of European Airlines, where the average fall in trade among its 380 million annual passengers was just 0.1 per cent.

German rival Lufthansa is reported to be the latest giant ready to swoop to its rescue by acquiring around a quarter stake in the troubled airline.

Given that Alitalia is losing €2million a day, has not made a profit in nearly 10 years and has needed a €300million government cash injection just to keep flying – which Brussels is none too pleased about – a white-knight saviour cannot come soon enough.

Prime Minister Silvio Berlusconi has bullishly talked up hopes of an impending deal. Last week he claimed the finance and blueprint for the airline’s future were in place and said: “We are negotiating with a big foreign company for an alliance at the international level.”

Most Italians would be forgiven for feeling they’ve heard it all before. Air France-KLM pulled out of a planned rescue last year after unions and Berlusconi – at the time still in opposition – voiced fury at proposals to axe more than 2,000 workers.

Mr Berlusconi dismissed the Air France-KLM bid as a “firesale”, claimed the French-Dutch conglomerate planned to get rid of 7,000 employees and has vowed to keep the airline in Italian hands.

However, he has been vague about details of the proposed rescue. He has given no clues as to the identity of the investment partner. Additionally, the Premier concedes it will involve some of redundancies among the Alitalia workforce.

But beyond claiming his administration would try to get away with as few layoffs as possible, he has failed to provide numbers. Union chiefs have made clear their displeasure at the manner in which they have been kept in the dark.

Their mood was not improved by the Government failing to meet a self-imposed deadline to present detailed proposals by the end of last month. Industry watchers do not expect any significant developments until autumn at the earliest.

Mr Berlusconi’s administration has now asked experts at Banca Intesa Sanpaolo to put together a new rescue blueprint. They are likely to recommend that before Alitalia enters into any grand international alliances, it is placed in administration and broken up, allowing investors to cherry-pick its most profitable divisions.

In the meantime, weary Italians can only look to the skies…and wonder how much longer Alitalia planes will be there.