With the Living Dead
“Astro Zombies,” 1968, directed by Ted V. Mikels
The undying saga of the Alitalia collapse is in a way a neat case of life imitating art, and cheap art at that. If the album graphics were any better, we’d illustrate this note with the cover of a 1996 CD by the London Funk Allstars called “Flesh Eating Disco Zombies versus Bionic Hookers from Mars” because it so clearly sums up the main themes of the question.
Instead, we’re offering the poster from “Astro Zombies,” a Sixties film for the drive-in movie circuit where it was presumed the people in the cars were not really looking at what was on the screen anyway. It is the “see crazed corpse stealers” line that especially makes this work for us. Useful information on Ted V. Mikels’ American cinema classic can be found (here).
At any rate, that Alitalia clearly belongs to the category of the living dead is not really at issue. The airline has accumulated losses approaching four billon dollars since 1999 and is at present refusing to furnish accounting data requested by doubtful Italian stock market authorities. The end is not in sight and so far the rotting corpse appears to be unkillable. Alitalia has been a disaster for many years and only the very peculiar voodoo of Italian public life has kept it from following the more appropriate destinies of the flag carriers of Belgium (Sabena) and Switzerland (Swiss Air), both of which were allowed to die when their numbers came up.
Formally speaking, the present “state of the art” is that the Italian Government is soliciting bids from investors interested in taking over the airline – so long as they swear they will not to try to manage it. Aside from being willing to take on at least 30.1 percent of the carrier together with an additional 600 million dollars in dodgy convertible bonds, as a condition for bidding they must promise not to touch a hair of Alitalia’s roughly 18 thousand ludicrously over-paid employees or meddle in any way with its byzantine route structure.
Offers promising these and other things are due within the end of this month and, since anyone actually wishing to buy the company would do much better to pick it up with fewer strings at a bankruptcy auction, there are not expected to be many takers. The Economist, under the appropriate title “Terminal Decline” – (here) – puts this somewhat differently: “no rational bidders can be expected;” and describes the exercise as a “cynical, if necessary, charade.”
The point of this farce is that Italy’s increasingly leftist Government feels politically obliged to demonstrate that “the market has failed” before it can go on and attempt to shore up the airline in the traditional manner, with a slimy under-the-counter deal that has nothing to do with trendy stuff like, say, the rights of shareholders or rational economics. The French, as we cleverly pointed out some months ago – (here) – are the expected partners.
The Italian Prime Minister, Mr. Romano Prodi, made this clear yesterday in a not very off the cuff remark to “France24,” the Gallic answer to CNN, when he said with regard to the hypothetical purchase of Alitalia by Air France that, “If we receive a clear and strong proposal, I will be in agreement. The Italian decision,” Prodi then explained, “is very simple. We’ve put Alitalia on the market, and if France wants to make an offer and that’s the best one, then it will be Air France.”
The little problem about this has so far been that the French don’t really seem to want Alitalia all that much; they will take it only if they are in essence paid to do so. As far as we can tell – and there are many reasons to believe this – their principal condition for pulling the Prodi chestnut out of the fire is unchanged; that is, the wings of the giant Italian electrical utility Enel must be clipped. Enel, in other words, must be forbidden to enter into competition with EdF, its French equivalent, and must stay out of the French energy market. Specifically, it must not make good on its threat to run a takeover on France’s vulnerable Groupe Suez.
Enel, like Alitalia, has theoretically been privatized – so the Italian Government certifies – and the majority of its stock is in the hands of private investors, something we’ve already discussed (here).
Bluntly put then, we are talking about using someone elses’ assets to bribe the French. Since the condition the Prodi Government is preparing to accept in order to unload its Alitalia problem cannot be allowed to see the light of day – it might persuade the capital markets that Italy is not a very good place to put money – many other colorful if unlikely justifications will be offered for this deal if, in fact, it is ever done.
“Upper Italy” does not normally offer investor advice, but on the off chance your mother is holding some Enel shares in her retirement account, you might suggest to her that she dump them quickly if an Italo-French “grande alliance” should suddenly emerge in the air transport business.