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Alitalia’s fate hangs in the balance. PDF Print E-mail
Jul 27, 2014 at 04:11 PM
ImageGovernment officials and Alitalia executives are waiting with bated breath to learn if Italy's flagship airline will survive. The outcome of a rescue operation that has been going on for several months now depends on whether Italy's unions - who are deeply split - agree to conditions for personnel cutbacks set by Etihad, the Abu Dhabi based airline that has made an offer for investments that would give it 49% of the Italian airline.

A majority of union voters approved the agreement in a referendum last week. But since only 27% of the 13,000 with the right to vote actually went to the ballot box, dissenting unions are saying the poll is not valid. On Sunday, Italian prime minister Matteo Renzi said if necessary he would call a meeting with labor organizing to make clear that their choice is between having a couple of thousand Alitalia employees out of work, or all 15,000. Some union leaders have said they will not accept any layoffs at all and want salry cuts to be spread out over a 12-month period.

Alitalia has been losing money hand over foot for the last decade, or more. As a private company, it is not obligated to release its 2013 results, but Italian newspapers have been speculating that losses last year might have been as high as 569 million euros. Etihad, which also controls 30% od Berlin Air and has stakes in several other airlines, has called for a massive debt restructuring along with job cuts that would cut Alitalia's workforce to 11,470 through more than 2,200 job cuts.

In December, the Rome-based carrier secured a €300 million ($408 million) cash injection from shareholders and €200 million in credit lines from banks to stave off insolvency. That transaction diluted to 7%. Air France-KLM's stake from it's previous 20 percent.

It should be remembered that Alitalia's problems could have been solved seven years ago when Air France made an offer to buy a majority stake. That offer was torpedoed by Silvio Berlusconi who, as the country's then prime minister, raised a hue and cry about keeping Alitalia Italian, turned down the offer, and put together an emergency consortium of Italian businesses who had no real interest in the airline and who got out as soon as the five years they had committed to had passed, leaving the airline inmuch worse condition than it was when Air France expressed interest. Another ruinous act of bad government by Berlusconi who naturally has never said he was sorry.

Another concern is that of investor Poste Italiane. Last year, the Italian postal service invested 75 million euros in Alitalia as part of a government engineered 500-million-euro bailout of the country's flag-carrier. But the company is now seeking assurances it will not be stuck with Alitalia's current debt obligation if it further increases its stake.

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