Should the Italian government continue to provide state aid to Alitalia, Italy’s national airline?
Should the Italian government continue to provide state aid to Alitalia, Italy’s national airline?
This case examines the impact to of Italy’s longstanding financial support to Alitalia. In September 2021, the European Commission ruled that loans issued to Alitalia by the Italian government constituted illegal state aid. Italian Prime Minister Mario Draghi had to decide whether to dispute or accept the decision.
This case explores the winners (Alitalia employees, hub cities, and vendor/contractors) and losers (Italian taxpayers, competitor airlines, market decisions) of continued state aid. Founded in 1946, Alitalia enjoyed great success in early decades and was a source of pride and patriotism for Italy. In the 1970s, Alitalia experienced a series of financial challenges including rising crude oil prices, recessions in North America and Europe, and worker strikes. At the time, the Italian government provided aid, an act which continued for years.
The case encourages critical reflection on the merit of state aid, the tradeoffs between sovereignty and commitment, and the consequences of ending a decades-long policy.
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