Troubled Italian airline Alitalia has been in a long-running battle against bankruptcy and has been through multiple bailouts and restructurings, but never managed to compete with the booming low-cost carriers in Europe. Alitalia has lost share in its home market—going from a 23% share in 2008 to an 18% share in 2015—and lost more than 8 million passengers in the past decade.
Alitalia has dealt with more than a decade of financial problems. After declaring bankruptcy in 2008 it was bought by Compagnia Aerea Italiana (CAI), who merged it with another bankrupt Italian carrier, Air One, and continued operations. Another major financial crisis was averted in 2014. On the verge of failing, Alitalia was saved when the Italian government helped broker a deal for Etihad to take a 49% stake. The carrier said at the time that it had a strategy to become profitable by 2017, but that has proven too ambitious.
Alitalia proposed a restricting scheme to its workforce that would have injected additional funds to save the company from going bankrupt. The plan would see more job and salary cuts – ideas that the workers rejected especially because the company has one of the lowest labor costs among legacy airlines across Europe. In Italy, and in Europe, unions are very strong, and have made headlines over the years when it came to holding airlines at bay or better said at ransom with their drastic labor actions that ended up costing their companies billions in money and reputation.
Even though the Italian government has stressed that it has no plans to nationalize the airline, Alitalia’s employees have just called the government’s bluffs, and don’t think that the government will let them fail. They may be right, or they may all be out of jobs in the coming months. However, the government knows that there would be catastrophic consequences if their biggest airline failed, which is seemingly why the airline has been kept alive for so long.
Barring an unseen outside influence, that leaves bankruptcy as the only option. According to the press release, the company now faces an impossible situation in which it could no longer proceed with their future plans of investing on new projects and improving the status of the airline. The vote against the agreement jeopardizes a key round of financing that had been planned to keep Alitalia solvent, meaning the airline now faces possible receivership, liquidation and a grounding of its fleet.
The banks which are supposed to lend money to Alitalia are Intesa SanPaolo and Unicredit, the two biggest banks in Italy with massive political implication and infiltration. Alitalia has survived so long because of political reasons, so banks are forced to keep the airline alive. Of course, the banks have in mind that they will have no returns, but in exchange for saving Alitalia, they will benefit from favorable policies which they need in other situations and which the parliament will approve for them. Furthermore, most the debts of Alitalia are towards other Italian suppliers, which will not see a cent if Alitalia goes bankrupt. Therefore, the economic circle will probably keep on spinning, for everyone’s benefit.
Andrea Gluscevic
Alitalia has dealt with more than a decade of financial problems. After declaring bankruptcy in 2008 it was bought by Compagnia Aerea Italiana (CAI), who merged it with another bankrupt Italian carrier, Air One, and continued operations. Another major financial crisis was averted in 2014. On the verge of failing, Alitalia was saved when the Italian government helped broker a deal for Etihad to take a 49% stake. The carrier said at the time that it had a strategy to become profitable by 2017, but that has proven too ambitious.
Alitalia proposed a restricting scheme to its workforce that would have injected additional funds to save the company from going bankrupt. The plan would see more job and salary cuts – ideas that the workers rejected especially because the company has one of the lowest labor costs among legacy airlines across Europe. In Italy, and in Europe, unions are very strong, and have made headlines over the years when it came to holding airlines at bay or better said at ransom with their drastic labor actions that ended up costing their companies billions in money and reputation.
Even though the Italian government has stressed that it has no plans to nationalize the airline, Alitalia’s employees have just called the government’s bluffs, and don’t think that the government will let them fail. They may be right, or they may all be out of jobs in the coming months. However, the government knows that there would be catastrophic consequences if their biggest airline failed, which is seemingly why the airline has been kept alive for so long.
Barring an unseen outside influence, that leaves bankruptcy as the only option. According to the press release, the company now faces an impossible situation in which it could no longer proceed with their future plans of investing on new projects and improving the status of the airline. The vote against the agreement jeopardizes a key round of financing that had been planned to keep Alitalia solvent, meaning the airline now faces possible receivership, liquidation and a grounding of its fleet.
The banks which are supposed to lend money to Alitalia are Intesa SanPaolo and Unicredit, the two biggest banks in Italy with massive political implication and infiltration. Alitalia has survived so long because of political reasons, so banks are forced to keep the airline alive. Of course, the banks have in mind that they will have no returns, but in exchange for saving Alitalia, they will benefit from favorable policies which they need in other situations and which the parliament will approve for them. Furthermore, most the debts of Alitalia are towards other Italian suppliers, which will not see a cent if Alitalia goes bankrupt. Therefore, the economic circle will probably keep on spinning, for everyone’s benefit.
Andrea Gluscevic