Alitalia turbulence shakes financial future

Alitalia to enter administration after job and pay cut deal rejected

Alitalia to enter administration after job and pay cut deal rejected

The airline will have six months to secure its future as it bids to enter administration in a deal with Italy’s government.

15:26, UK,
Tuesday
02
May
2017

Alitalia has six months of financial support under the deal with the Italian government
Image:
Alitalia has six months of financial support under an Italian government plan

Shareholders in Alitalia have voted unanimously for the airline to enter administration, in a deal with the Italian government that would allow it to keep flying.

The move was approved by investors days after the airline’s staff rejected a proposed restructuring that would have seen 1,700 of them lose their jobs – with the rest subject to salary cuts of around 8%.

The reforms were a precondition of a proposed €2bn investment to secure the future of the loss-making company, which has struggled to compete on key European and domestic routes with no-frills rivals such as Ryanair.

Under the arrangements now being sought by Alitalia, the Italian government will appoint administrators to run the business and give them bridging loan financing for up to six months to enable a buyer to be sought and keep planes in the air.

However, a nationalisation has already been ruled out and analysts have warned that 20,000 jobs – including 12,500 at Alitalia – will be lost if administrators fail and liquidators are called in.

In a statement, Etihad Airways, which has a 49% stake, and other shareholders voiced “deep regret” at the outcome of the workers’ ballot and reiterated that they could not inject any more cash.

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Manchester City FC is sponsored by Etihad

“Italian shareholders and Etihad, based on the strong potential growth of the company, and on an industrial plan which included a structural cost reduction of which two thirds were not related to labour costs, were committed to recapitalise and finance the plan with €2bn.

“This commitment was subject to an agreement with the trade unions, which was rejected by the employees in a referendum.

“The board of directors, which convened after the shareholders meeting, having acknowledged the serious economic and financial situation of the company, of the unavailability of the shareholders to refinance, and of the impossibility to find in a short period of time an alternative, has decided unanimously to proceed with the filing for “amministrazione straordinaria” (extraordinary administration) in compliance with the Italian law.

“Alitalia’s flight schedule will continue to operate as planned.”

The company lost €460m last year and a similar loss is predicted for 2017.

Source

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