Alitalia faces bankruptcy after employees vote down plan

ROME (AP) — The risk of bankruptcy looms for Italy’s flagship airline, Alitalia, after employees resoundingly rejected proposed salary cuts and layoffs that were aimed at securing investments and keeping the carrier afloat.

It’s the latest twist in the decades-long saga of decline for the loss-making company, which has been through multiple bailouts and restructurings but never managed to compete with the booming low-cost carriers in Europe.

Alitalia said Tuesday that its board concluded that in light of the employees’ vote on Monday, it has decided to “begin procedures foreseen by law,” a reference to extraordinary administration. The board will meet Thursday to discuss the move.

Such a scenario could result in shedding unprofitable routes, most likely predominantly domestic ones, to competitors, and selling off aircraft to help pay creditors.

It was unclear if the Italian government might try to convince European Union officials to allow a “bridge loan” for Alitalia to ease the crisis.

In a statement, Alitalia’s board, said it had “taken note with regret” of the rejection of the cost-cutting plan, whose aim was to open the way for investment, including more than 900 million euros (about $1 billion) in new financing.

“All parties will lose: Alitalia’s employees, its customers and its shareholders, and ultimately also Italy, for which Alitalia is an ambassador all over the world,” said James Hogan, the airline’s vice chairman and president and CEO of Etihad Aviation Group, Alitalia’s biggest minority shareholder.

Hogan noted that Etihad had poured in “vast amounts of financial and commercial support during the past three years” and had reaffirmed “its strong commitment and principal willingness to support the airline with a package worth nearly 2 billion euros ($2.2 billion) in aggregate to help fund Alitalia’s new five-year business plan.”

But that commitment hinged on employees approving the cost-cutting plan.

Workers and passengers of Alitalia, which continues to fly its routes as normal, are familiar with a mood of crisis.

For decades, various restructuring proposals and privatization efforts — championed by governments of various political stripes — failed to turn the airline around.

In one such move, a group of Italian business leaders, dubbed “the captains courageous,” in 2008 tried to heal the company by taking on the “healthy” operations and isolating the loss-making businesses.

That strategy, which saw job losses and wage cuts, came after then-Premier Silvio Berlusconi dismissed foreign airlines’ interest in Alitalia, declaring that the company must stay “Italian.”

Alitalia has struggled with stiff competition from low-cost carriers, especially on domestic or European routes, as well as the convenience of high speed trains between Milan and Rome.

But Alitalia’s latest crisis reflects “the errors of all,” the daily Corriere della Sera wrote in a front-page column Tuesday. “Shareholders, management, governments, employees,” as well as what the Milan daily called a chronic rationale in Italy that “there is always a way out less painful than the bill presented by reality.”

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