Put your wallet away: Alitalia's no longer for sale. The carrier has abandoned its quest for private investors and turned to state holding company IRI for the full capital injection.
The Italian treasury has now confirmed that IRI will inject the remaining L1.5 trillion (US$880 million) of fresh funds into Alitalia, after private investors failed to materialise. 'It has been difficult to get private investors during this problematic time for Alitalia,' concedes IRI. The state holding company has already provided the first half of Alitalia's L3 trillion capital injection.
But at least part of those funds are unlikely to find their way to Alitalia. The European Commission is understood to have set a maximum ceiling of L2.8 trillion and is expected to rule in April whether the funds constitute state aid. Any earlier ruling on the capital injection was scuppered by Brussels' demands that Alitalia make its restructuring plan 'less expansionist and more prudent' after Alitalia reported higher than expected losses for 1996, explains a senior Commission official. Alitalia lost L1.3 trillion in 1996 ($842 million at last year's exchange rate).
The Commission is demanding that the modified plan includes details of which unprofitable routes Alitalia will drop, job reductions and cost cutting. Some redundancies will come from the ground staff but not as many as first suggested. Giorgio Scoppetta of ground staff and cabin crew union FIT claims there will be only 300 job cuts through early retirement instead of 1,000 initially suggested. Scoppetta does not foresee a problem in finding volunteers. Alitalia has cut the number of employees it intends to hire for low-cost subsidiary Alitalia Team by 500 to 1,500.
The cuts amid ground crew have no doubt been eased by an 8 per cent wage increase awarded in February. Scoppetta concedes that this rise 'could be seen as funny' when the carrier should be cutting costs. Some savings should come from wage cuts the carrier will look to impose on cabin crew in April, a move Scoppetta supports. 'The more we move with the company the easier it will be to get Commission approval for the plan,' he says.
However, Alitalia's main cabin crew union, Sulta, is less accommodating and is threatening strike action, says Lamberto Contigliozzi of the union's secretariat.
Alitalia's troubles do not end here. The Italian carrier is seeking damages from the receivers of Fokker, after the bankrupt manufacturer failed to deliver 10 F70s ordered in 1995. Alitalia has returned its five F70s to Fokker, claiming that it was 'uneconomical to run such a small fleet'. It intends to replace them with MD-80s where possible.
Alitalia has also filed a complaint with the courts over the 'unfair' transfer of Noman's slots to Air One, after the two domestic competitors merged in mid-February.
Source: Airline Business
