Europe-based airlines resent Italian governments bailout loan to Alitalia

Tuesday, June 10, 2008, 21:06 by Aviation Correspondent

Major airlines of Europe have urged the European Commission to oppose the Italian government’s recent $468-million loan to Alitalia intended to prevent the state-controlled airline from going bankrupt.

Alitalia, the flag carrier airline of Italy and headquartered in Rome, is in deep financial trouble. It has been looking for a buyer for the last one and a half years.

The six airlines that wrote to Antonio Tajani, Transport Commissioner for the European Commission against bailing out Alitalia are: British Airways, Virgin Atlantic, Finnair, SAS, Iberia, and Tap Portugal. They pointed out in the letter that the Italian government’s financial aid to Alitalia violates aid rules of both the European Union and of Italy.

Alitalia had, in May 2008, received an emergency government loan of €300 million (£240 million) that was converted to an asset on its books.

The 6 rival airlines wrote to the Transport Commissioner for the European Commission: “It is our understanding that without this aid Alitalia would fall below the necessary capital requirements and would be required to declare itself bankrupt under Italian law and would therefore cease to operate. We strongly oppose this action, as it is not the first time Alitalia receives ‘life support’ by the Italian government thereby completely ignoring EU competition and state aid rules.”

The Telegraph newspaper quoted analysts as saying that the letter by the 6 airlines would increase pressure on Antonio Tajani, himself an Italian, to take action.

The 6 airlines also asked Tajani to conduct a “thorough investigation into the terms and conditions of the new loan.”

The letter, which gives a list of other financial “life supports” that Alitalia has received from the government of Italy since 2000, continued: “The government aid would enable Alitalia to continue to distort competition in the markets it serves by using public funds to undercut competitors’ prices. This market behaviour is even more noteworthy given that Alitalia is reportedly losing €1.4 million a day.”

Governments bailing out airlines have been a bone of contention recently in the international commercial aviation sector. For instance, many Europe-based airlines have opposed the United States government’s help to airlines that filed for Chapter 11 bankruptcy after the September 11, 2001, terrorist attacks, describing such help as “anti-competitive.”

The objection by the 6 airlines of Europe to the Italian government’s financial aid to Alitalia comes in the backdrop of carriers worldwide being burdened with record-high fuel prices as well as the deceleration in consumer spending that is dissuading more and more people from travelling.

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