Word: alitalia
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Those airlines lacking resources and scale may have little choice but to yield to larger ones, analysts say. Alongside Air France-KLM - Europe's biggest airline and still a favorite to grab a minority stake in beleaguered Italian flag carrier Alitalia - and the ever growing Lufthansa, an enlarged BA and Ryanair would mean "for most of the smaller network airlines who have a very weak balance sheet, they're going to have to fold into one of those four groups," says Exane BNP Paribas' Van Klaveren. Scandinavian Airlines (SAS), for one, "will survive 2009, but I doubt it can survive...
...There's still a slim possibility Alitalia can be saved. Air France-KLM or German carrier Lufthansa might make a new offer, or the Italian consortium could reconsider if the labor syndicates show more leeway. But the likelier scenario is that Italy's national carrier goes under for good...
...short-term consequences of that are serious: up to 18,000 employees could suddenly be looking for a job, while key domestic routes vital to the Italian economy would go underserved. In broader terms, Alitalia's demise would be yet another blow to the country's image abroad and to confidence at home. Berlusconi, who has maintained a hard line since negotiations imploded, has banked much of his credibility on resolving the crisis and keeping Alitalia under Italian ownership...
...airline, AirOne, and foreign carriers will almost certainly fill the profitable Rome-Milan route, while low-cost carriers will jump on other Italian destinations. "The market will do its job," he says. "This kind of evolution would bring more competition." A significant number of laid-off Alitalia employees would eventually be rehired by other airlines, he says...
...Economist Andrea Goldstein notes that Alitalia in the 1970s was considered an avatar of the efficient European public company. There is a certain irony, Goldstein says, that it faces its death as the free-market oriented U.S. government steps in to bail out much of America's financial-services industry and China revs its own state-run economy. "There is a paradox that as the state elsewhere returns to play a prominent role in managing national economies, in Italy the state is too weak to handle this situation," says Goldstein. The Italian economy seems to suffer from the worst...