Alitalia has lost competitiveness as the European aviation market has been liberalized
FILE - In this March 25, 2009 file photo, an Alitalia Airbus A320 is parked at the Linate airport in Milan, Italy. Italy’s struggling flagship airline, Alitalia, headed toward its second period of receivership in a decade on Tuesday, May 2, 2017 with the board of directors saying it had no choice after workers overwhelmingly rejected a relaunch plan that would have unlocked new investments. The board expressed “deep regret” that workers had voted against the government-brokered relaunch plan, which had softened planned job and salary cuts but was criticized for not having realistic strategy for reviving revenue. (AP Photo/Antonio Calanni, File), photo: AP/Antonio Calanni
02 of May 2017 15:24:59
MILAN — Struggling Italian air carrier Alitalia entered its second period of bankruptcy protection in a decade on Tuesday with the government approving a 600 million-euro ($650 million) bridge loan to keep the airline operating as it seeks a new buyer.The move came after the Alitalia board acknowledged the failure of a government-brokered relaunch plan, which workers overwhelmingly rejected despite softened job and salary cuts, out of concern it lacked a realistic strategy to revive revenue.The plan's failure blocked a planned 2 billion-euro ($2.2 billion) investment from both managing shareholder Etihad Airways, with a 49-percent share, and a consortium of Italian investors that controls a 51-percent stake.[caption id="attachment_57809" align="aligncenter" width="1200"] Italy’s struggling flagship airline, Alitalia, headed toward its second period of receivership in a decade on Tuesday, May 2, 2017 with the board of directors saying it had no choice after workers overwhelmingly rejected a relaunch plan that would have unlocked new investments. Photo: AP/Antonio Calanni[/caption]Economic Development Minister Carlo Calenda said the goal in the short term is to seek buyers while protecting service, routes and workers and "spending as little government money as possible."The Italian government named three administrators — Luigi Gubitosi, Enrico Laghi and Stefan Paleari — to see Alitalia through a six-month period of reorganization.Alitalia has lost competitiveness as the European aviation market has been liberalized, suffering in particular under competition from low-cost carriers. Its failure has previously been staved off by government interventions.Analysts, however, say it may be difficult to find another suitor, making the prospect of liquidation more likely than in past crises as the government may lack the political will to ensure the carrier's survival as a stand-alone entity."There is an air of inevitable disaster," said airline analyst Gregory Alegi, who teaches at Rome's LUISS University. "We could see something like Austria Air or Swissair, which ended up in the Lufthansa world but much slimmer and trimmer."Milan Polytechnic University Finance Professor Marco Giorgino said any potential buyer "needs to understand the reality of managing a company with high debt that has lost market share and with high operating costs."In lieu of a buyer to take over the company, the government-appointed administrators could consider selling off pieces of Alitalia.Alitalia has emphasized that its flights are operating on schedule heading into the summer tourist season. Alegi said the airline was unlikely to suffer an immediate loss of bookings since much summer travel was already scheduled.However, the company may run into trouble booking longer-term travel and with group operators, which could cost it cash."Would you buy a ticket now for an operator that may not exist in six months?" Alegi asked.
Alitalia filed for bankruptcy protection in 2008 when it was still state-owned, but avoided liquidation when then-Premier Silvio Berlusconi organized a group of Italian investors to step in during a privatization process. Etihad took a 49-percent stake in 2014.Etihad Aviation Group CEO James Hogan said in a statement that Alitalia needs "fundamental and far-reaching restructuring to survive" and made clear the Abu Dhabi-based airline is not prepared to continue pumping money into the Italian company.Hogan said Etihad's involvement delivered "significant improvements" early on. He blamed "marketplace challenges," including competition from budget airlines and the effect of terror attacks on tourism, for Alitalia's continued struggles.Hogan said Italy remains an important market for Etihad and the airline will continue to partner with Alitalia within its alliance that includes Air Berlin, Air Serbia and Air Seychelles.Alitalia's latest woes come as Qatar Airways has closed a deal to buy a 49 percent stake in Italy's second-largest carrier, Meridiana.
Regular flight programme and services. No changes to flight schedule or operations. pic.twitter.com/hsjC8CpxMi— Alitalia (@Alitalia) April 30, 2017