Buyers Give Alitalia New Ultimatum, Unions Split

September 17, 2008

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An investor group offering to rescue state-controlled airline Alitalia from bankruptcy has threatened to withdraw on Thursday if its proposal does not get union approval, a union source said.

After days of tense negotiations with workers, the head of CAI, a group of Italian businessmen, told unions he would propose pulling the offer at a shareholders' meeting if they do not come on board by then, the source said.

Alitalia, a national symbol in Italy for more than six decades, risks being liquidated after years of political interference, union disputes, mismanagement and, more recently, high fuel costs.

The carrier, which had EUR1.17 billion euros (USD$1.66 billion) in debt at the end of July, is losing more than EUR2 million a day.

After two previous attempts to sell the state's 49.9 percent stake failed, the new government led by Prime Minister Silvio Berlusconi persuaded a group of investors to present a rescue plan.

But only three of Alitalia's notoriously feisty nine unions said on Wednesday they were ready to accept CAI's offer.

The biggest, CGIL, said it was not optimistic that a deal could be reached, while one of the main pilots' groups said it remained opposed in the absence of changes to the plan, which involves job cuts, lower pay and reduced benefits.

Employment Minister Maurizio Sacconi said the alternative to a deal was Alitalia's failure, and that the greenlight from three unions represented "an important consensus basis."

A source close to the talks said "approval by a significant number of unions would be enough" for CAI to go ahead.

Some 3,250 of Alitalia's 20,000 workers would be laid off under the bailout plan, which would see CAI buy only the profitable parts of the airline before relaunching it as a slimmed-down regional carrier.

Roberto Colaninno, CAI's chairman, said on Wednesday he had no further concessions to make and "there is nothing left to discuss."

A close aide to Berlusconi, Gianni Letta, told unions at a meeting on Wednesday they had until 3.50 pm (1350 GMT) on Thursday to give their final position.

Alitalia's government-appointed special administrator has said the airline is running out of cash for fuel and said all planes could be grounded if unions did not quickly back the buyout offer.

Even as Alitalia teetered on the brink of collapse, a strike by a small union cancelled 50 flights on Wednesday. A spokesman said the company was still able to buy fuel.

Previous deadlines set by CAI and the government have come and gone but Sacconi insisted the very last moment for unions to sign on was Thursday.

An Alitalia collapse would be a huge political blow for Berlusconi, a business mogul who promised voters who elected him in April that he would use his contacts to find an Italian buyer.

Berlusconi has offered special payouts to the workers who would lose their jobs under the rescue plan, but warned that offer would be pulled if the airline collapsed.

Underscoring the problems in the sector, Greece said on Wednesday it would shut down its ailing state carrier Olympic Airlines and relaunch it under a new structure.

(Reuters)