Calls rise across Italy to let Alitalia fall into bankruptcy

Lorenzo Schapira tries to avoid flying Italy’s near-bankrupt flagship carrier, Alitalia. The planes are run-down and the service is “appalling,” he says.

“The government should let Alitalia go bust,” the 52-year-old who runs a disco and a sports club near Milan said on board a flight on rival carrier Air One from Rome to Milan.

He’s not alone. Travelers interviewed last week at Milan’s Linate and Rome’s Fiumicino airports said that they’d given up on Alitalia and that politicians should too. About three-quarters of Italians disapprove of the government’s 300-million-euro ($473 million) bailout for the carrier, according to a June 5 online poll published by daily newspaper Corriere della Sera.

“Airlines go bankrupt all over the world,” said Alessandro Rovere, who works in the computer industry in Milan. “I don’t see why Italy shouldn’t do the same for Alitalia.”

State-controlled Alitalia posts losses of about 3 million euros a day. No buyer has surfaced for the carrier since Prime Minister Silvio Berlusconi said during his election campaign in April that a large number of buyers had answered his appeal to keep Alitalia in Italian hands.

It’s “a question not only of pride but of national security,” he said April 9 on RAI state radio in Rome.

The emergency loan is buying little more than three months’ worth of oil.

“I hoped Berlusconi would stop pouring money into Alitalia,” said Sara Chiappara, 33, a textbook editor for a Milan publisher. “It’s unbelievable. We’ve done our part for Alitalia. It’s enough.”

Alitalia Chairman Aristide Police told shareholders June 28 in Rome that the airline faced its “last chance” to avoid filing for bankruptcy. The stock lost almost half its value this year before its trading was suspended June 4 pending a sale.

The government has given bank Intesa Sanpaolo until the end of July to have a plan to improve the airline’s finances.

Former Alitalia Chairman Maurizio Prato told labor unions that “only an exorcist could save it” after worker opposition to job cuts scuttled takeover talks with Air France-KLM Group in April.

Even Alitalia’s largest labor union, Filt-Cgil, says the current bailout is useless without clear measures to boost market share and make money. Italy has injected about 3 billion euros into Alitalia in the last decade.

Airlines around the world are struggling to cope with oil prices above $140 a barrel. At least 24 airlines, including Silverjet of Britain, have failed this year. Carriers such as United Airlines and Ireland’s Ryanair Holdings are cutting back capacity.

In Italy, consumers are abandoning Alitalia in spite of a new advertising slogan that tries to make using the carrier a patriotic act: “Flying Alitalia Makes Italy Fly.”

“People think the company has no future,” said Emanuele Marella, 37, a cheese maker in Rome. He said he chose Air One because when he booked the night before he paid only 130 euros for a flight to Milan, compared with the 300 euros quoted by Alitalia. “They need to act quickly.”

Rome-based Air One, owned by Italian entrepreneur Carlo Toto, controlled 37% of the Italian market in 2007.

Elio Lannutti, head of Italian consumer group Adusbef and an opposition-party senator, said people lacked confidence in Alitalia.

You “don’t know if or when you’ll get to your destination,” he said. “There are structural problems with the airline and you can’t resolve them with national pride.”

Bookings at Alitalia dropped 20% when the talks with Air France-KLM failed. Traffic plunged 26% in April, according to the Assn. of European Airlines.

Alitalia has said that bookings have recovered, and that it was more punctual and canceled fewer flights than its bigger European rivals.

Italian Industry Minister Claudio Scajola said the government would stand by Alitalia while seeking a buyer.

An “important country like Italy can’t do without a flagship carrier that can compete in international markets, safeguarding national interest, especially for a country where tourism is so important,” he said this week.

Complaints about Alitalia often center on the company’s aging aircraft. An Alitalia official said the company wouldn’t comment on its airplanes.

Alitalia’s fleet, including regional and low-cost units, had an average age of 12.4 years at the end of 2007, compared with 8.8 years for Paris-based Air France.