Visiting or Shipping into Italy?

September 18th, 2008 at 12:41pm Bob Trojan

From Times Online

September 18, 2008  (Chris Helgren/Reuters)

Alitalia had been flying the flag for Italy over the last six decades

Richard Owen in Rome

The bankrupt Italian airline, Alitalia, collapsed today after a consortium of Italian industrialists withdrew its offer to buy the carrier.

Silvio Berlusconi, the Prime Minister, said: “We are facing the abyss.” Luigi Angeletti, head of the UIL union, one of three unions that had accepted the bid by the Italian Air Company (CAI), said that the collapse was “a catastrophe for Italian society and trades unions”.

The collapse comes after weeks of brinkmanship, with unions banking on being able to squeeze further concessions from the consortium and calculating that Mr Berlusconi, who had put his prestige on the line to find an “Italian solution”, would not allow it to fail.

The end of the talks spells doom for a carrier that has been a proud national symbol of Italy for more than six decades, flying the Italian tricolour, but which has suffered from chronic labour disputes and mismanagement, aggravated more recently by crippling fuel costs.

The takeover consortium had laid down a deadline of 3.50pm local time for the airline’s nine unions to back it. As the deadline neared, Maurizio Sacconi, Italy’s Labour Minister, admited that Alitalia’s future was “hanging by a thread”.

After the deadline passed the group of investors, led by Roberto Colaninno, chairman of the scooter manufacturer Piaggio, withdrew its bid. With no other offers on the table, Alitalia’s administrator, Augusto Fantozzi, said that this would mean the airline now faced liquidation proceedings. There were shouts of protest and dismay from Alitalia workers demonstrating outside the CAI meeting as the news emerged.

Mr Berlusconi has said that the airline’s 20,000 workers cannot expect generous redundancy packages in the case of liquidation. Mr Fantozzi said that although previous deadlines had come and gone, this time Alitalia simply had “no cash left to continue”.

Alitalia, founded in 1946, needs €1.4 million (£1.1 million) a day for fuel and loses a further €2 million a day, adding to debts of €1.17 billion recorded at the end of July. The CAI consortium had offered to inject €1.5 billion into Alitalia and merge it with Air One, Italy’s second largest carrier.

Three of the four larger unions said that they could accept the deal, but smaller ones, including those representing pilots and flight attendants, objected to the proposed loss of more than 3,000 jobs and new contracts laying down longer hours for the same pay.

Fabio Berti, leader of ANPAC, the pilots’ union, said that his members were prepared to make “extraordinary sacrifices” to persuade CAI to change its mind and return to negotiations.

Despite the crisis, Alitalia’s planes continued to take off and land normally. Fifty flights were cancelled today, but the airline said that this was because of a one-day strike by a small trades union.

Mr Berlusconi, who had earlier said that he was “still optimistic”, blamed the leftwing union CGIL, which held out against the deal, for causing the crisis. CGIL had tabled a counter proposal together with the pilots union and other smaller unions involving further negotiations, but CAI members said that it was too late.

The CAI offer called for 3,250 layoffs and generous benefits of up to 80 per cent of pay for eight years for those who lost their jobs. But Mr Berlusconi gave warning this week that this offer would not apply in the case of liquidation.

The previous centre-left government of Romano Prodi started the process to sell the Government’s 49.9 percent stake in the airline nearly two years ago. After an auction failed, the airline entered into talks with Air France-KLM, which made an offer.

However Air France-KLM withdrew this Spring because of “unacceptable” union conditions, and because of alleged lack of support from Mr Berlusconi, who was fighting en election campaign at the time and vowed for patriotic reasons to “find an Italian solution”.

The CAI plan also involved a foreign airline taking a minority stake in the new Alitalia. Mr Sacconi had claimed that British Airways, Air France-KLM and Lufthansa were all interested. Maintenance and freight operations were to have been sold off.

The Government made a €300 million emergency loan to Alitalia in April, but under EU rules could not pump in any further state aid. It has spent €5 billion of public money over the past 15 years to keep Alitalia afloat.

Alitalia is the first major European flagship airline to collapse since Swissair Group and Belgium’s Sabena in 2001. Greece said yesterday that it would also shut down its ailing state carrier, Olympic Airlines, and relaunch it.

In a statement CAI said that the “dramatic situation” of Alitalia and that of the international markets did not allow any further scope for negotiations, in which “numerous concessions” had already been made. The consortium was “deeply disappointed” that a plan that could have given new life to the airline despite the current “difficult moment for the airline sector and the economy as a whole” had been rejected.

CAI said that one of the most important conditions attached to its offer had been the attainment of a broad agreement with the unions on new contracts. “Such an agreement was not reached,” the consortium said, adding that only three unions — CISL, UIL and UGL — had accepted the terms.

Mr Sacconi said the failure of the talks was the “logical consequence” of the “absurd obstructionist position” taken by CGIL and its allies, including the pilots’ union. However Guglielmo Epifani, head of CGIL, said that the union would “not be a scapegoat. We accept our share of responsibility, but so must the Government”.

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