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ATW Editor's Blog

Alitalia’s endless extensions on government money


In what has become close to a bimonthly event, another request has been made to extend the deadline for a business plan to be submitted to get Alitalia back on its feet.

For more than two years, Alitalia has limped along, thanks only to a €900 million ($1.1 billion) Italian government bridge loan. Less than half of that money is believed to be left and the European Commission opened an investigation last year into whether the loan constitutes state aid and complies with European Union rules.

Italian railway group Ferrovie dello Stato, which leads the consortium seeking to take over Alitalia, is believed to be seeking a “substantial delay” beyond the Sept. 15 deadline—one that has already been extended five times. By the end of this year, Alitalia will have been in administration for two-and-a-half years, is expected to post another substantial loss, and will likely have burned through the government loan.

And yet its unions show no signs of comprehending the gravity of their company’s situation, nor any willingness to make even the smallest concessions to secure its future. Instead, they are threatening more strikes in October and insisting on new ownership conditions that could easily lead to the collapse of the rescue plan.

Delta Air Lines is part of the rescue bid consortium. Alitalia’s unions reportedly do not approve of the proposed business plan because they say it would subject the Italian carrier’s interests to those of Delta and its Air France-KLM partner. Under the plan, they say, Alitalia would become “even more marginalized and destined to a rapid exit from the global air transport landscape.”

But without the government’s repeated and substantial financial propping up (and after significant investment by former owner Etihad Airways), Alitalia would have long-since exited the global air transport landscape.

Why do the unions think they can keep dictating the terms for a much diminished, essentially regional player as if it were an industry giant? Because they know the government will keep opening the coffers—legal or not.

That is decidedly unfair to Europe’s other carriers that have restructured and are competing in an increasingly tough environment without government loans.

In Delta’s case, it’s also hypocritical. At the same time the US carrier is campaigning against Milan-based Air Italy, alleging it is operating only because of subsidies, Delta is seeking to become a part owner of an airline that is clearly and indisputably functioning only because of government money. And everyone—Alitalia, the unions, Delta-- seems fine with endlessly extending deadlines so long as they do it on government money.

Wouldn’t we all like to run a business that way?


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