PHOENIX is said always to rise from the ashes. Alitalia, Italy’s national airline, may not be so lucky. On January 12th a lock-up of shares will expire, making it likely that some of the 21 Italian investors which have supported the firm since 2008, will sell their holdings—at a time when the airline badly needs help.
When Alitalia nosedived into administration five years ago, it was kept airborne by the Progetto Fenice (“phoenix project”). Led by Intesa Sanpaolo, a big Italian bank, which also took a stake, a group of Italian businessmen pumped around €1 billion of their firms' cash into a new company that took over Alitalia's business and agreed to hold onto their shares until January 12th.
Air France-KLM, a Franco-Dutch airline, also took a 25% stake in the venture after having been thwarted in its attempts to buy the airline outright. Unions and, in particular, Silvio Berlusconi, then prime minister, opposed a takeover. The airline, he argued, would simply take tourists to the chateaux of the Loire, rather than to Italy's historic cities.
Some of the Italian businessmen certainly thought their investment in Alitalia would be profitable. But cynics reckoned they mostly stumped up money to keep in with Mr Berlusconi. At any rate, few of them, if any, are likely to want to continue the experience of being airline angels.
Since 2008 the firm has piled up plenty of losses. In 2009 Alitalia lost €327m ($436m), followed by €168m in 2010 and €69 million in 2011 (on revenues of €3.5bn). In the first nine months of 2012 things got worse again: the airline reported a loss of €173m. What is more, by the end of September debt had grown to €923m and liquidity, including unused credit lines, fallen to €300m.
Some of these dismal numbers are due to Europe’s stagnating economy—something which Roberto Colaninno, Alitalia's chairman, pointed out when announcing the third-quarter results. But Alitalia’s problems go much deeper.
Low-cost airlines are winning market share both in Europe and in Italy. The Rome-Milan route, on which Alitalia offers 30 flights a day in each direction, for instance, was once a money-spinner. But regulators have ordered the firm to give up some slots at Milan's Linate airport to easyJet, a budget airline.
High-speed trains also offer new competition. The state railways runs 33 high speed trains daily between the two cities. And in April Italo, a private-sector competitor, entered the market. Trains on that route are much cheaper and don’t take longer after accounting for security checks and other annoyances of air travel.
Alitalia will need fresh capital if it is to rise again. Things like selling assets such as airport slots and raising loans on aircraft will get it only so far. And existing shareholders are unlikely to inject money. “It would be difficult to win shareholder support for a capital increase—unless there is a very clear project to end the game,” says the boss of a firm that owns shares.
So capital will have to come from elsewhere. Air France-KLM says it is not a buyer, but Etihad Airways of Abu Dhabi is rumoured to be interested (then again, the fast-growing Gulf carrier is rumoured to be the saviour of pretty much any distressed airline these days). Perhaps the government will again pitch in: Italy's state railways and the state-owned Cassa Depositi e Prestiti bank are talked about as possible investors.
Alitalia's crash and rebirth in 2008 coincided with a general election and the shareholder lock-up expires as another general election campaign gets under way. But however disguised, another helping hand from the state is sure to encounter strong opposition from other airlines as well as the European Commission.
Just before Christmas, Alitalia again won an award for best airline cuisine. Perhaps Mr Colaninno and Andrea Ragnetti, the firm’s chief executive, should simply close down flying operations and establish Alitalia as a caterer for other airlines. At least then it would be fulfilling Mr Berlusconi’s objective of ensuring that Italian culture continues to be appreciated by the world’s travellers.