When the Italian airline Alitalia went bankrupt in 2008, the government swooped in with taxpayer money and Pope Benedict XVI - a regular flyer - offered the carrier a blessing. Six years later, as Alitalia stumbled into debt yet again, the government engineered another rescue.

But on Wednesday (AEDT) even a papal decree would not have been enough to save Alitalia from what threatened to be its final stand, as Europe's most troubled airline filed for bankruptcy once more. And this time signs are that the government, and the Italian people, are fed up with providing life support to the ailing carrier.

The latest drama over one of Italy's most visible industrial symbols has plunged the already chaotic political and economic environment into further uncertainty. The country was regrouping after voters, in a populist outpouring, rejected constitutional changes in a December referendum that felled Matteo Renzi, then Italy's prime minister.

Uncertainty over the health of the nation's banks, plagued with €360 billion ($US390 billion) in bad debt, has also been rattling global financial markets. Investors are worried that Italy, a "too big to fail" member of the eurozone, may set off another round of uncertainty for the single currency should new problems in the country's banking system jeopardise its economy.

Like the Italian state, Alitalia has always been too big to fail. The carrier has already cost Italian taxpayers an estimated €7 billion over the decade.

This time, officials say there will be no new bailout of the airline, which has been a fixture of the economy and one of Italy's largest employers since it was founded in 1947. No other carriers have come forward to express interest in taking it over.

Alitalia will be put into the hands of special administrators charged with coming up with a last-ditch plan to turn around the carrier within 180 days, or put it into liquidation.

Company officials had said that in order to keep the struggling carrier alive, adjustments were needed in the 12,400-strong workforce, which operates around 120 planes and had 22.6 million passengers last year. By contrast, its low-cost rival Ryanair has around 11,000 employees for 300 planes and more than 100 million passengers.

But when unions and management negotiated a rescue plan involving 1,600 layoffs, an 8 per cent pay cut and more working days a year in exchange for €2 billion in fresh financing, employees rejected it. They seemed to be gambling that the state would come to the rescue, given the political and economic consequences of letting Alitalia collapse.

Renzi, who is trying to engineer a political comeback, has said he would come up with a plan for Alitalia if he is re-elected leader of the Democratic Party in an internal party election this weekend.

"It seems that Alitalia workers have all gone nuts," Simone Filippetti, a finance and economy reporter at Italian daily Il Sole 24 Ore, wrote in a column. "Why did they reject a plan that involved a hard sacrifice but a chance of recovering to instead face the risk of a total company disruption and liquidation, and ultimately all lose their jobs anyway?"