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The case discusses the problems faced by Italy''s government controlled airline company - Alitalia that led to its poor financial performance since the fiscal year 2000. It examines the efforts taken by the company''s top management to turn around the company and explores why they have been largely unsuccessful. The case details the role played by the Italian government in the company''s business matters and the poor labour relations in the company. With the leadership change in March 2004, the case identifies the issues faced by the new chief executive officer and its management team. It includes a comprehensive note on the European civil aviation industry with a focus on Italy. The case is structured to enable students to: (1) understand how internal, industry-specific and macroeconomic factors can negatively affect the financial performance of a company; (2) examine the role of government in business; (3) study the importance of good labour relations for proper functioning of a company; (4) study the structure and dynamics of the European civil aviation industry in general, and Italian civil aviation industry in particular; and (5) discuss the measures to be taken by the management of Alitalia in order to revive the company''s financial and business performance. The case is aimed at MBA/PGDBA students and is intended to be part of the strategy and general management curriculum.