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The long-drawn crisis at Italy''s national airline, Alitalia, started during the mid-1990s, when the low cost revolution invaded Europe. Even as the airline was fending off threats from the low cost carriers, the September 11 attacks followed by the SARS outbreak and the war in Iraq was sounding a death-knell to Alitalia. Twice, the Italian government ferried the deteriorating airline out of bankruptcy - in 1997 and in 2002. But, when the bankruptcy woes came back in 2004, the European Commission opposed the government''s move for a third bailout, raising serious doubts about the airline''s survival. This case study details how Alitalia, in spite of two bailouts, slipped to the verge of bankruptcy owing to pressures from low cost carriers and unions. The case also focuses on the new industrial plan jointly developed by the government, Alitalia and the unions.