Marco Messalla/ROME

European Transport Commissioner Neil Kinnock has approved state aid for Italian flag carrier Alitalia, saying that this should bring to an end applications for aid from European airlines.

The approval, granted on 15 July, allows the airline's state-holding company IRI to complete the L2,750 billion ($1.6 billion) cash injection agreed a year ago. IRI had already pumped L1,000 billion into the airline in July 1996 and is now free to inject another L1,000 billion. The remainder will be paid out over the next two years, depending on the carrier's making "satisfactory progress" with its re- structuring effort.

As expected, the conditions imposed on Alitalia include a range of restrictions on fleet expansion, safeguards over fare levels and the promise to cut the workforce by 1,212 people (Flight International, 16-22 July).

Alitalia will have to sell its 30%stake in Hungarian carrier Malev and its remaining 5%in the Alfa Avio aero-engine operation, as well as interests in the Galileo computer-reservation system and in a series of regional Italian airport companies, including those in Genoa, Naples and Turin. The airline will, however, be able to keep its 27%of Italian charter carrier Air Europe and 45%of Eurofly.

The carrier had already disposed of its 56% stake in Aeroporti di Roma, but stands to gain around L300 billion when the airport company completes a 41% float, under agreements which ensure Alitalia a share of any future increase in the company's commercial value.

Other conditions of the aid include a freeze on the carrier's fleet of 157 aircraft, extending to the subsidiary operations of Alitalia Team and Ali Express, which is due to start operations in August, taking over Alitalia's Aero International (Regional) ATR fleet. Expansion of available seat kilometres will be allowed to rise in line only with overall market growth.

The relationship between Alitalia and the Italian Government will also be more commercial, with no discrimination allowed in favour of Alitalia over areas such as slot allocation and international traffic rights.

Source: Flight International