Introduction Alitalia is the largest airline in Italy, with a market share capacity of 24% in the region. The carrier operates both domestic and regional network services within Italy, Europe, and international airports. However, the airline has made losses since 2009 when the new company came into existence after financial investors and Italian industrialist acquired assets belonging to the old Alitalia due to bankruptcy. In 2012, Alitalia made a massive loss of 280 million euros, making its cumulative loss to 483 million euros since the new Alitalia was formed in 2009 (Alitalia, 2014). As a private entity, Alitalia has to be in a position to make profits or find itself being pushed out of the market/industry by its fierce competitors. The airline’s financial details indicate that it had to borrow money in 2013 from its shareholders in order to fund its operational costs (Alitalia, 2014). There has been an improvement on operations since 2009 that led to rising load factors, on-time performance improvement, as well as a major fleet replacement and renovation process; investment in fleets and technological innovation has been the reason for success for many airlines in this competitive industry (Curran, Verhagen, Ghijs, Ghobbar, & Zwan, 2010). However, all these positive changes have failed to influence financial recovery at Alitalia. Its cost in the market has been competitive against full-service network carriers but it remains a high-cost airline in short route flights compared to its competitors (CAPA Global Aviation Industry Outlook, 2013). Huge losses, current leadership woes, and bankruptcy are the main challenges that the airline continues to face even as it tries to improve its operations from 2013. Although debt may be termed as a viable source of capital due to its tax-shield benefits, excess debt to equity in the case of Alitalia has demonstrated the airline’s financial problems that have been precipitated by inadequate working capital. The effect of this heavy borrowing has been the worsening of liquidity position due to poor operational cash flows (Clougherty, 2002). Fuel prices have also had devastating effects on the costs of Alitalia flights, just as they have to the entire airline industry (Curran et al., 2010). The increase in fuel prices has made operating expenses increase significantly to 160 million euros. Alitalia noticed that the average price of oil increased up by 40% from 78 US dollars per barrel to 108 US dollars per barrel (Alitalia, 2014). The change in fuel prices has caused debt increase for the company as it considers better strategies to reduce its operational costs. Moreover, leadership wrangles had made Alitalia bankrupt, with top management unable to pay its employees. That problem continued from 2004 to 2008 when the company decided to enter into a partnership with international airlines in order to curb financial woes that had seen the company almost collapsed. The agreement saw certain terms and conditions reviewed before new owners and management took over the company. Alitalia has encountered passenger capacity growth by 11% from 2009 to 2012, and a fall in 2012 by 1.3%. Its load factors have grown drastically, matching a figure of 74.6% in 2012, up from 65% in 2009 (Alitalia, 20