Alitalia Faces Key Union Talks As Rescue Takes Off

August 31, 2008

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Alitalia's unions will hold talks with the government on Monday on a rescue plan for the airline and on job losses -- which a minister said could be under 5,000 -- after it sought bankruptcy protection on Friday.

Alitalia's long-awaited move comes after nearly two years of hunting for a buyer and sets it up for rebirth as a smaller airline alleviated from the baggage of debt and high staff costs.

A group of 16 Italian investors led by turnaround expert Roberto Colaninno is, sometime this week, expected to confirm its interest in assets of Alitalia to be split off, such as planes and slots, newspapers said this weekend.

And British Airways could be interested along with Air France-KLM and Lufthansa, La Repubblica newspaper said on Sunday, just over a week after an industry source said the carrier would not consider a partnership with Alitalia.

On Sunday, British Airways said it did not comment on speculation.

The Italian investors could offer EUR300 million to EUR350 million euros for the Alitalia assets which would form the core of a revitalized airline, as part of an investment which could total EUR1 billion.

The government of Prime Minister Silvio Berlusconi amended bankruptcy law and antitrust regulations on Thursday to facilitate the rescue plan to create a new Alitalia.

The new carrier will dominate the key domestic route between Milan and Rome as it absorbs competitor Air One, owned by one of the Italian investors, Carlo Toto.

Alitalia and Air One are the two dominant airlines that operate on that route. But antitrust authorities can now only rule on tariffs, not on slots.

EU Monetary Affairs Commissioner Joaquin Almunia said the solution has to conform to EU rules and be good for the company and employees as well.

Brussels is still investigating a EUR300 million cash injection from the Italian government made earlier this year, which it thinks might be illegal state aid.

Italian Economic Development Minister Claudio Scajola told Il Messaggero newspaper in an interview published on Sunday he thought the plan would get approval from Brussels because it did not involve state aid.

Intesa Sanpaolo, the bank hired to advise on the sale of Alitalia, has said the rescue plan depends on agreement from unions, who scuppered the last attempt to find a future for the airline in a sale to Air France-KLM.

"The next four weeks will be crucial," Intesa Sanpaolo Chief Executive Corrado Passera said on Friday.

Employment Minister Maurizio Sacconi said job losses could be under 5,000 in an interview with La Repubblica newspaper on Saturday -- less than the 6,000 to 7,000 that previous reports have suggested.

The plan also calls for an international partner further along the line for the new company.

Air France-KLM has now said it is ready to take a minority stake in the revived Alitalia.

Newspapers at the weekend suggested it could take a 20 percent to 25 percent stake. Il Sole 24 Ore newspaper said on Saturday it could invest around EUR200 million.

Lufthansa has also been tipped as potentially interested. The German airline, currently looking at Austrian Airlines, has always said Italy remains an important market for it.

(Reuters)