Alitalia deal faces stiff opposition

The latest Italian government carve-up could see moribund Alitalia rise miraculously from the ashes...

Last Updated: 31 Aug 2010

Italian government officials are meeting trade unions leaders today to try and get them to agree to the latest rescue plan for Alitalia, the moribund carrier that is losing €2m a day (and wouldn’t be there at all if it wasn’t for a government bail-out in April).  The idea is that a slimmed-down version of the carrier will stay Italian-owned – assuming aggrieved rivals don’t manage to topple the plan first...

The plan to keep Alitalia Italian was a centrepiece of Silvio Berlusconi’s re-election campaign, and was largely responsible for the failure of an earlier rescue bid put together by the previous government, with the backing of Air France-KLM. But it’s still dependent on the backing of the unions, who have already scuppered previous deals – and are unlikely to be thrilled by the rumoured 5,000 job losses this latest ‘Operation Phoenix’ will entail.

Alitalia finally filed for bankruptcy on Friday, so the deal is also contingent on the government forcing through specific amendments to the bankruptcy laws. These would allow the carrier’s profitable operations to be merged with smaller Italian carrier Air One, speeding up lay-offs, and operating flights while the rescue package is arranged. The idea is that the resulting company – stripped of many of its costs – will pass into the control of 16 Italian investors who are stumping up a total of about €1bn.

They’ll certainly have friends in high places: having made it an election promise, Berlusconi will be pretty keen to make this deal happen. That’s presumably why the government is also promising to compensate shareholders and bondholders, provide seven years of welfare support to redundant workers, and leave the carrier with a monopoly on the most profitable domestic route (between Milan and Rome).

So it’s no wonder that there appear to be lots of foreign airlines interested in taking a minority stake (Belusconi won’t allow anything more than that, of course) – Air France-KLM is sniffing around again, as is Lufthansa, while reports suggest that BA may also be interested. But this kind of heavyweight support is also likely to attract the attention of the competition authorities – not to mention disgruntled rivals, who will be up in arms about Alitalia receiving what looks like more state aid.

Lead investor Roberto Colaninno (of Piaggio fame) insists that this is a genuine ‘market operation’ – but if there was a genuine market in operation, Alitalia would have gone bust a long time ago...

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