South America is a land where countries often prop industries far past what is appropriate and generally to maintain jobs for constituencies.  This has been what Italy has done with Alitalia, what India has done with Air India and what Argentina has done with Aerolineas Argentinas.

It’s what Colombia could have chosen to do with Avianca and didn’t.

The Wall Street Journal has a story about Avianca’s comeback over the last 20 years which is culminating in Avianca’s stock being listed on the New York Stock Exchange and which will raise $500 million for Avianca’s expansion plans.

Avianca is an example of why private industry is what saves airlines, not governments.  There are many examples in the airline industry similar to Avianca but Avianca represents exactly what airlines such as Alitalia need.

Aggressive, entreprenurial restructuring that reduces costs and creates opportunities for genuine growth.  There isn’t a government known to man that has such talent.

Avianca’s salvation came from an industrialist who saw opportunity in the ashes of Avianca’s bankruptcy.

Alitalia isn’t saveable.  But should the airline go away, there is enormous opportunity for airlines to come in and provide employment with thriving enterprises.  The wages aren’t going to be as high, that’s true.  No airline that is competing today does offer the kinds of wages and job protection experienced by Alitalia employees.  And none should experience such.

With all of that said, I also don’t expect Italy or India or Argentina to embrace reality any time soon either.  It’s possible that Italy may be forced to let go but only because of the obligations Italy is under as a function of debt rescue performed by the European Union.

Otherwise, Italy would pour money into Alitalia no matter what was demanded of them by anyone.

Filed under: Airline News, Mergers and Bankruptcy by ajax