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Airlines: Alitalia may stop flying within weeks

Can this airline be saved? (Courtesy Alitalia)

The Italian airline Alitalia is in trouble. Dozens of articles in the foreign press over several months tell the same story: The risk is very high that Italy's largest airline will be forced to stop flying between now and July.

More immediately, the Italian civil aviation authority is threatening to take away the company's license to fly within the next few weeks.

Here's my two cents: Do not book future tickets on Alitalia!

UPDATE Aug. 6, 2008: Read the latest news, here.

If you've already booked your ticket, what can you do?

Don't cash in your ticket yet. It may take so long for Alitalia to process your refund that, in the event the airline collapses in the meantime, your paperwork will get lost. Now that you've made a purchase, you're better off relying on your credit card company as back-up protection. If Alitalia shuts down, file a dispute with your credit card company immediately, to get reimbursed.

Buy a back-up ticket. If you absolutely have to make your trip, book a fully refundable ticket on a rival airline. (You'll need to be able to afford to buy this second ticket, of course, which will be quite expensive.) Then, right before your trip starts, when it's clear that Alitalia is still okay to fly, you should cash-in your refundable ticket. In this situation, you'll do better than you would if you didn't buy a back-up ticket and Alitalia collapsed. Last-minute fares on rival airlines will probably be astronomically high--even higher than the refundable fares available now.

Bring the airline's phone number with you (800/223-5730). If you're at the airport when your flight is canceled, call the number while you're walking to the airline counter (and stay on while in line). This two-pronged strategy increases your chance of getting on the next flight.

If your flight is canceled, be sure to get proof in writing by paper (at the gate) or by email (at home). If you don't have proof of a cancellation, you're facing an uphill battle if the charge eventually shows up on your credit card bill and you need to dispute it.

Sign up for alerts before you depart. Alitalia won't send text messages to your phone, but you can always use Google. Just send a text message to "Google" (466453) from your cell phone and then enter your flight arrival/departure info. (Type the flight number; for example, for Delta Flight 395, type DL395—the code you'll find on your boarding pass.) If you have access to a Web browser, you can also look up this info on Google, as we've blogged about before. Alternatively, if you can receive email on your phone or portable device, you can sign up for alerts from FlightStats.com (or by phone), a company that reports on delays and cancellations. These flight alerts are sometimes more up-to-date than electronic boards at airports.

Be wary of tight connections. Many international flights between the U.S. and Italy involve such connections. If your itinerary requires you to change planes, you risk being unable to make your onward connection because your first flight may be delayed or canceled due to Alitalia's troubles. Be attentive to the layover time between flights and consider paying a fee to re-book an itinerary with additional time to make any connections. If it's tight, consider buying travel insurance from a third-party, such as AIG's Travel Guard.

Here's the backstory:

Sickly Alitalia has about $270 million in cash, which it is burning through at a rate of between $1 million a day and $6 million a day, depending on which source you believe.

A few years ago, the European Union (EU) ruled that member governments cannot directly inject cash into individual airlines. The EU said that such government subsidies are unfair to smaller start-ups and foreign rivals. Without a government subsidy, Alitalia will not be able to balance its books, especially during the many months it would take for the airline to fix its problems.

The best solution was a recent offer from Air France-KLM to (essentially) take control of the airline. But on Monday, the Italian people decided to bring back the previously disgraced Silvio Berlusconi, returning him to the prime minister's seat. In reaction, Air France-KLM will call off its proposed offer because Berlusconi does not support it.

Milan is part of the problem. Under the proposed deal, Air France-KLM would likely curtail flights out of Milan's Malpensa airport because many of the routes out of that airport are unprofitable. But Milan is Berlusconi's hometown and central political base, and the city opposes any cuts. Money troubles have already led Alitalia to already slash two out of three of Milan flights. Workers have been threatening to go on strike, and one flight attendant has been a hunger strike for four days.

Berlusconi said today that Italian investors will step forward and take over the airline. But it's unclear which investors he is talking about, and none has stepped forward so far.

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Note:This story was accurate when it was published. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.

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