What if Italy had been a capable air/naval power?

Italy is more likely to come out ahead if they go after the Balkans. I don't see them avoiding war with Britain and eventually the US if they go after France or any of its possessions. I'm not sure the same can be said for most of the Balkan countries.

 

Even today, Hungary and Romania are regional powers to be reckoned with. So instead of sending troops to fight in the SU, Italian navy and submarines would be active in the Black Sea as transports and air power in Finland, between Libya and Italian East Africa. Even if Italian took the Balkans, ethnicity would still be problematic.Unlike Finland where neighboring Karelia has been sparsely population and allows immigration by Finnish population. The Italian peninsula is surrounded by centuries old ethnicity. How a stable governance of ethnicity would be interesting.

Another interesting note would be Italy taking parts of French West Africa and Egypt -- today Chad and South Sudan -- as the land bridge between Libya and Italian East Africa. If Italian exploitation of Libyan petroleum had been successful, geological assessment of Chad and South Sudan would likely to take place simply because the French and the British had not considered. By this series of assessment, South Sudanese petroleum resources would be discovered and exploited.

In general, what-ifs need to happen at the same time to change Italian fortunes -- which are why this topic is about alternative history.