Alitalia Rescue Wins Support Of Holdout Unions

September 29, 2008

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An Italian investor bailout of Alitalia won the grudging support of the last two unions on Monday, ending tortuous union talks that at one point appeared to doom Italy's national airline to liquidation.

Hold-out unions SDL and AVIA representing cabin crew and ground staff followed the example of other unions who changed their minds and agreed to back a deal with Italian consortium CAI, which briefly withdrew its offer over union opposition.

That allows CAI, a group of 16 wealthy Italian entrepreneurs and businesses, to shift its attention to finding a foreign partner for Alitalia and press ahead with a plan to relaunch it as a smaller, leaner carrier by early November.

"We've signed the deal, but there's nothing to celebrate," said Antonio Divietri, the head of the AVIA union, adding its workers had been left out "like a dog on a balcony".

"One in three of us will be laid off. There are people who are losing their jobs and suffering."

The sudden reversal of fortunes for the loss-making carrier -- it risked losing its operating license as talks floundered last week -- is a victory for Prime Minister Silvio Berlusconi, who returned to power in May vowing to rescue the airline.

Alitalia, which sought bankruptcy protection in August after buckling under the weight of crippling oil prices and high staff costs, must now have its assets valued and merged with those of domestic rival Air One before it can be reborn.

CAI still faces other obstacles in relaunching the airline -- including scrutiny from European Union regulators -- but convincing its combative unions to back a plan that trims pay and cuts more than 3,000 jobs was its biggest challenge.

"It seems to me that things are moving ahead on Alitalia, but there are a series of obstacles to overcome and time is limited," Italian aviation authority ENAC's Chairman Vito Riggio was quoted as saying by the Ansa news agency.

EU regulators could still hold up the deal if they determine it restricts competition or benefits from unfair government aid.

Both Air France-KLM and Lufthansa have shown interest in a relaunched Alitalia as the airline sector consolidates to weather stiff competition and high oil prices.

But the government of Berlusconi -- who opposed an earlier Air France-KLM offer under the previous government on the grounds that Alitalia should remain Italian -- insists any foreign airline must only have a minority stake.

"It's up to CAI to decide what's the best offer for our country, but it must be a minority," Industry Minister Claudio Scajola said.

CAI's chairman Roberto Colaninno said the French and German airlines were "battling to become Alitalia's partner".

Italian airline Eurofly said it had expressed an interest in some of Alitalia's assets, but gave no additional details.

(Reuters)