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Alitalia Files for Bankruptcy, but Italy Balks at a Third Bailout Alitalia Files for Bankruptcy, but Italy Balks at a Third Bailout
(about 1 hour later)
When the Italian airline Alitalia went bankrupt in 2008, the government swooped in with taxpayer money and Pope Benedict — a regular rider — offered the carrier a blessing. Six years later, as Alitalia stumbled into debt yet again, the government engineered another rescue.When the Italian airline Alitalia went bankrupt in 2008, the government swooped in with taxpayer money and Pope Benedict — a regular rider — offered the carrier a blessing. Six years later, as Alitalia stumbled into debt yet again, the government engineered another rescue.
But on Tuesday, even a papal decree would not have been enough to save Alitalia from what threatened to be its final stand, as Europe’s most troubled airline filed for bankruptcy once more, this time amid signs that the government, and the Italian people, were fed up from providing life support.But on Tuesday, even a papal decree would not have been enough to save Alitalia from what threatened to be its final stand, as Europe’s most troubled airline filed for bankruptcy once more, this time amid signs that the government, and the Italian people, were fed up from providing life support.
The latest drama over one of Italy’s most visible industrial symbols has plunged the already chaotic political and economic environment into further uncertainty. The country was regrouping after voters, in a populist outpouring, rejected constitutional changes in a December referendum that felled Matteo Renzi, then Italy’s prime minister.The latest drama over one of Italy’s most visible industrial symbols has plunged the already chaotic political and economic environment into further uncertainty. The country was regrouping after voters, in a populist outpouring, rejected constitutional changes in a December referendum that felled Matteo Renzi, then Italy’s prime minister.
Uncertainty over the health of the nation’s banks, plagued with 360 billion euros, or about $390 billion, in bad debt, has also been rattling global financial markets. Investors are worried that Italy, a “too big to fail” member of the eurozone, may set off another round of uncertainty for the single currency should new problems in the country’s banking system jeopardize its economy.Uncertainty over the health of the nation’s banks, plagued with 360 billion euros, or about $390 billion, in bad debt, has also been rattling global financial markets. Investors are worried that Italy, a “too big to fail” member of the eurozone, may set off another round of uncertainty for the single currency should new problems in the country’s banking system jeopardize its economy.
Like the Italian state, Alitalia has always been too big to fail. The carrier has already cost Italian taxpayers an estimated €7 billion over the decade.Like the Italian state, Alitalia has always been too big to fail. The carrier has already cost Italian taxpayers an estimated €7 billion over the decade.
This time, officials say there will be no new bailout of the airline, which has been a fixture of the economy and one of Italy’s largest employers since it was founded in 1947. No other carriers have come forward to express interest in taking it over, including Lufthansa, which had been cited as a possible white knight.This time, officials say there will be no new bailout of the airline, which has been a fixture of the economy and one of Italy’s largest employers since it was founded in 1947. No other carriers have come forward to express interest in taking it over, including Lufthansa, which had been cited as a possible white knight.
Alitalia will be put into the hands of special administrators charged with coming up with a last-ditch plan to turn around the carrier within 180 days or put it into liquidation. After the Italian government approved the bankruptcy filing on Tuesday, Alitalia will be put into the hands of special administrators charged with devising a last-ditch plan to turn around the carrier within 180 days, sell it, or put it into liquidation.
Company officials had said that in order to keep the struggling carrier alive, adjustments were needed in the 12,400-strong work force, which operates around 120 planes and had 22.6 million passengers last year. By contrast, its low-cost rival Ryanair has around 11,000 employees for 300 planes and more than 100 million passengers. Company officials had said that in order to keep the carrier alive, adjustments were needed in the 12,400-strong work force, which operates around 120 planes and had 22.6 million passengers last year. By contrast, its low-cost rival Ryanair has around 11,000 employees for 300 planes and more than 100 million passengers.
But when unions and management negotiated a rescue plan involving 1,600 layoffs, an 8 percent pay cut and more working days a year in exchange for €2 billion in new financing, employees rejected it.But when unions and management negotiated a rescue plan involving 1,600 layoffs, an 8 percent pay cut and more working days a year in exchange for €2 billion in new financing, employees rejected it.
They seemed to be gambling that the state would come to the rescue, given the political and economic consequences of letting Alitalia collapse.They seemed to be gambling that the state would come to the rescue, given the political and economic consequences of letting Alitalia collapse.
Mr. Renzi, who is trying to engineer a political comeback, has said he will come up with a plan for Alitalia if he is re-elected leader of the Democratic Party in an internal party election this weekend. (Neither he nor the party has offered details.)Mr. Renzi, who is trying to engineer a political comeback, has said he will come up with a plan for Alitalia if he is re-elected leader of the Democratic Party in an internal party election this weekend. (Neither he nor the party has offered details.)
The Five Star Movement, a populist grouping that has increased power, has also not commented on whether it would support the use of more taxpayer money to save Alitalia.The Five Star Movement, a populist grouping that has increased power, has also not commented on whether it would support the use of more taxpayer money to save Alitalia.
In the meantime, the situation has outraged some Italians, who took to Facebook and Twitter to protest spending any more taxpayer money on top of the billions already doled out by the government.In the meantime, the situation has outraged some Italians, who took to Facebook and Twitter to protest spending any more taxpayer money on top of the billions already doled out by the government.
“Alitalia bankruptcy is due to bad management and #ConsumerChoice. Italian state shouldn’t give any money to save it,” Luca Bertoletti, the European affairs manager at Consumer Choice Center, an Italian consumer rights organization, said in a message on Twitter.“Alitalia bankruptcy is due to bad management and #ConsumerChoice. Italian state shouldn’t give any money to save it,” Luca Bertoletti, the European affairs manager at Consumer Choice Center, an Italian consumer rights organization, said in a message on Twitter.
And consumers lit up the airline’s Facebook page with angry complaints after it offered discounts for new bookings just days after rejecting the rescue offer, without mentioning that it was heading into bankruptcy.And consumers lit up the airline’s Facebook page with angry complaints after it offered discounts for new bookings just days after rejecting the rescue offer, without mentioning that it was heading into bankruptcy.
Alitalia, which sustained losses for most of the last decade, had started to become profitable again in recent years after the government negotiated a 2014 rescue by Etihad, a carrier based in Abu Dhabi. Etihad took a 49 percent stake after Alitalia had stumbled following a rescue operation by Prime Minister Silvio Berlusconi in 2008.Alitalia, which sustained losses for most of the last decade, had started to become profitable again in recent years after the government negotiated a 2014 rescue by Etihad, a carrier based in Abu Dhabi. Etihad took a 49 percent stake after Alitalia had stumbled following a rescue operation by Prime Minister Silvio Berlusconi in 2008.
The Middle Eastern airline made new investments and financed a revision of Alitalia’s business plan to compete better with low-cost carriers. But losses started to mount again in 2015, to nearly €200 million, as Alitalia failed to ward off fierce competition from low-cost airlines, and terrorist attacks in Europe hurt travel.The Middle Eastern airline made new investments and financed a revision of Alitalia’s business plan to compete better with low-cost carriers. But losses started to mount again in 2015, to nearly €200 million, as Alitalia failed to ward off fierce competition from low-cost airlines, and terrorist attacks in Europe hurt travel.
Alitalia sought to recover this year with a plan to slash €1 billion in costs, cut 2,000 workers and reduce salaries by up to 30 percent. Unions negotiated all those demands down in a deal struck last month that would have released new financing.Alitalia sought to recover this year with a plan to slash €1 billion in costs, cut 2,000 workers and reduce salaries by up to 30 percent. Unions negotiated all those demands down in a deal struck last month that would have released new financing.
Instead, pilots and cabin crew rebuffed the accord, throwing Alitalia yet again into an uncertain future.Instead, pilots and cabin crew rebuffed the accord, throwing Alitalia yet again into an uncertain future.
“It seems that Alitalia workers have all gone nuts,” Simone Filippetti, a finance and economy reporter at the Italian daily Il Sole 24 Ore, wrote in a column. “Why did they reject a plan that involved a hard sacrifice but a chance of recovering to instead face the risk of a total company disruption and liquidation, and ultimately all lose their jobs anyway?”“It seems that Alitalia workers have all gone nuts,” Simone Filippetti, a finance and economy reporter at the Italian daily Il Sole 24 Ore, wrote in a column. “Why did they reject a plan that involved a hard sacrifice but a chance of recovering to instead face the risk of a total company disruption and liquidation, and ultimately all lose their jobs anyway?”