Prospects for Alitalia bailout by CAI brighten as unions say yes

Tuesday, September 30, 2008, 19:44 by Aviation Correspondent

With more labour unions supporting the move by Italian investor CAI consortium to buy the Alitalia, the flag-carrier airline of Italy, prospects have become brighter for the bailout of the cash-strapped carrier.

The CAI consortium had already got Alitalia’s major labour unions agree to its plan to buy the airline, which had faced liquidation after the investor group briefly withdrew its offer.

The carrier’s ground staff had already approved the plan to eliminate about 3,000 jobs and impose longer hours for the same pay.

In a statement, the Unione Piloti association said there would be fewer job cuts for pilots than the CAI had originally planned. The new proposal, the statement added, included hiring about 140 part-time pilots and a separate contract for captains.

Italy’s Minister for Transport Altero Matteoli told Sky TG24 television in an interview: “The agreement with pilots allows us to look at coming days with great serenity. Now we can let planes take off.”’

Labour unions representing most of Alitalia’s 2,500 pilots already have reached an accord with the CAI group, led by Roberto Colaninno.

Colaninno, also chairman of scooter manufacturer maker Piaggio, has brought together a group of investors who want to merge Alitalia’s flight business with domestic competitor Air One in order to create an airline that would control over half of the Italian aviation market.

Roberto Colaninno, former chairman of Telecom Italia SpA, has pledged along with over 15 partners to invest about 1 billion euros ($1.46 billion) to buy Alitalia’s commercial flight assets. The partners have said that they intend to make Alitalia earn operating profit in two years.

According to official estimates, Alitalia was losing $3 million a day when it declared insolvency on August 29, 2008, paving the way for the launching of the government-supported rescue plan.

A few days ago, Augusto Fantozzi, Alitalia’s bankruptcy administrator, had warned that the airline did not have enough cash to survive beyond September 2008.

Alitalia, which flew 25 million passengers in 2007, was on the verge of becoming the first major flagship carrier in Europe to go bust since the collapse of the Swissair Group and Belgium’s Sabena in 2001.

Alitalia, headquartered in Rome, capital of Italy, has its hub at Rome’s Leonardo da Vinci Airport. Malpensa International Airport in Milan was one of Alitalia’s hubs before it was downgraded to a focus city in April 2008.

According to aviation analysts, even after Alitalia wins the support of all trade unions, the carrier would still need a foreign partner to compete over the long-term. The bailout deal could also face scrutiny from European regulators over whether the deal restricts competition and whether the airline benefited from the huge aid it received from the Italian government.

In addition, Alitalia’s assets must be valued and the assets of domestic rival Air One acquired by the CAI consortium before Italy’s national carrier can be re-launched. (Air One, the independent airline based in Rome, Italy, operates high-frequency domestic scheduled network to about 25 destinations and international services to several cities in Europe.)

The Italian government has been trying to sell Alitalia for over two years now, but opposition from labour unions had led to cancellation of an offer from Air France-KLM Group in April 2008.

Alitalia had originally been scheduled to participate in the merger in 2004 of Air France with KLM that led to the formation of Europe’s biggest airline. However, Alitalia was later excluded from the merger and told to improve its finances.

Air France, Deutsche Lufthansa and British Airways have expressed interest in buying a stake in Alitalia.

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