Alitalia To Be Liquidated If Not Sold
Italian national carrier Alitalia will be shut down unless it finds a buyer, the government said, in an apparent warning to unions that played a central role in deterring suitors.
Italy scrapped its seven month auction of the loss-making airline on Wednesday after the last bidders pulled out, and now faces dwindling options and growing political embarrassment over the sale's failure.
"Other than a sale, there is only liquidation," Economy Minister Tommaso Padoa-Schioppa told Italy's Corriere della Sera newspaper, "Making Alitalia attractive to an investor seems more difficult than we thought."
The warning could put pressure on Alitalia's perennially striking unions to agree to concessions that would make the airline more appealing to a potential buyer.
The center-left government has already been blamed by the opposition and unions for the sale's collapse, and it could be further embarrassed if left with the airline on its hands.
The issue could come up at a cabinet meeting on Friday, while Padoa-Schioppa has agreed to address parliamentary panels on Alitalia.
One cabinet minister suggested giving Alitalia away for just one euro, or allowing the airline to go bankrupt.
"When something is diseased, you need to amputate it," Infrastructure Minister Antonio Di Pietro said.
The Economist magazine created a further stir in Italy by saying in a preview of its Friday issue that liquidation was the best option for an airline that needed "shock therapy."
A source close to the situation said that under Italian law Alitalia could not enter "Chapter 11"-style administration, with protection against creditors, as it is still solvent.
Italian newspapers have run banner headlines on the crisis and one newspaper began a poll on whether the state should save Alitalia or allow it to go bust.
"Working in the last few days has been real hell," said one Alitalia flight attendant who asked not to be named.
Alitalia, whose board meets on Friday to discuss its future, is working on a contingency plan for the next year focused on redesigning its network and curtailing losses, sources familiar with the matter said.
The plan to be discussed would aim to raise revenues by EUR100 million and reduce losses by cutting connecting flights to concentrate on point-to-point tickets, the sources said.
Alitalia's union woes -- and Rome's perceived reluctance to allow a buyer free rein to cut its 20,000-strong workforce -- have been integral to the absence from the auction of competitors such as Air France and Lufthansa.
Both airlines say Alitalia needs a radical turnaround to be of any interest. Indeed, a day after yet another strike by some staff, at least five Alitalia flights were cancelled at Milan's Linate Airport alone -- one due to "airline inefficiency," according to an Alitalia employee at the counter.
"I am not scared of the liquidation idea. In that scenario, someone able to fix things properly could come in," said one senior Alitalia pilot who asked not to be identified.
The three final bidders in the auction -- Russia's Aeroflot, US funds MatlinPatterson and TPG, and Italian carrier Air One -- have suggested they could be tempted back if the terms of the sale change.
Rome was taken by surprise when Air One pulled out since the government had agreed to some changes in terms the small carrier had sought, Padoa-Schioppa told Corriere della Sera.
Rome has said it will now look at all options, including opening direct talks with former bidders.
"It is hard to predict the outcome of the current sale process but on balance we think the players that could in theory pay a strategic premium have made their intentions clear by pulling out of the auction," Deutsche Bank said.
Alitalia bleeds over a million euros daily. It will soon need more cash after writing down its ageing fleet in May and the European Commission has ruled out allowing Rome to give it any further state aid.
As Padoa-Schioppa told the newspaper: "We have confronted a situation that has shown itself to be much more critical than we imagined."