The Italian Government is putting pressure on Alitalia to deepen cost cuts before it releases the third tranche of recapitalisation funds. The Italian flag carrier cancelled another 34 services last week, including three intercontinental flights, and the finance ministry has recommended that the airline make further cuts and lay off more staff.

The finance ministry received European Commission go-ahead in October for the final L750 billion ($350 million) segment of its 1997 recapitalisation plan, which had been frozen by the EC under regulations banning state aid to airlines.

The ministry is now in conflict with the transport ministry over its calls for a doubling of redundancies from 2,500 to 5,000. Transport minister Pietro Lunardi is undertaking a three-week review of Alitalia's restructuring plan after the airline's estimated €425 million ($380 million) loss in turnover for October, stemming from the events of 11 September. The airline says it is confident that, due to cost-cutting measures, this will not translate into a similar operating loss.

Alitalia's passenger traffic fell by 17.1% in September compared with September 2000, but an 11% cut in capacity meant a 5.2 percentage point load factor fall to 78.8%. Alitalia's North American destinations were down on revenue passenger kilometres by almost 30%.


The situation of fellow Italian carriers Gandalf Airlines, Air Europe and Volare Airlines, meanwhile, is worsening. The board of regional carrier Gandalf Airlines was due to discuss a rescue plan on 29 October for the privately owned operator following its recent failure to raise fresh money in a re-capitalisation effort. The Bergamo-based airline originally hoped to raise an additional €15.5 million to pay off its debts, which climbed to €11 million by mid-October.

The Volare Group, which controls Volare Airlines and Air Europe, will hold an extraordinary shareholding meeting in early November to launch a re-capitalisation. Some 49.8% of the Volare Group is held by Swissair, which is seeking to sell its airline holdings.

Source: Flight International