Alitalia Employees Reject ‘Last Chance’ Restructuring Plan By Vote – Looming Liquidation And Grounding Of The Airline

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Alitalia employees were called upon to cast a historic vote concerning the future of their employer but the vote resulted in a drastic rejection of the restructuring plan widely seen as the airlines last chance.

Management and trade unions worked out the plan to restructure Alitalia (again) and attempt to turn the airlines bad fortunes around by cutting wages and laying off employees. 

The unions however also pushed for the criteria that this plan has to be sanctioned by Alitalia employees through a vote which was a controversial decision and as it turned out did very little to resolve the situation of the loss making carrier which is now facing a grounding as Italy’s political leadership has made clear there would be no involvement of the government in any way and there is ‘No Plan B’ for Alitalia.

Unions are very strong in Italy and actually throughout Europe and have made headlines over the years when it came to holding airlines at bay or better said at ransom with their drastic labor actions that ended up costing their companies billions in money and reputation.

The Financial Times (access here) reported about the situation of Alitalia after the vote a few hours ago.

Alitalia, Italy’s flag carrier, has been plunged into chaos after its workers rebelled against a deal struck ten days ago by management and trade unions to save the airline from collapse by cutting wages and laying off employees.

The vote against the agreement jeopardises a key round of financing that had been planned to keep Alitalia solvent, meaning the airline now faces possible receivership, liquidation and a grounding of its fleet.

Paolo Gentiloni, Italy’s prime minister, called key ministers to Palazzo Chigi, the seat of the government in Rome, on Monday night for emergency talks about the fate of the carrier, which has been a staple of European civil aviation since its first flight in 1947. …

Alitalia tried to get back on course earlier this year with a plan to cut €1bn in costs over the next three years with up to 2000 layoffs and salary cuts of up to 30 per cent. In a deal reached with the trade unions on April 14, which was supposed to pave the way for a new round of financing for the airline, the redundancies were reduced and the wage cuts were slashed to 8 per cent.

But the staff of 11,400 employees still rejected the solution in Monday’s vote, putting an end to hopes that this could be a way out. “It was an agonising but determined vote against a company that has done little until now to lift its fortunes,” the trade unions said in a statement as the outcome became clear.

I’m not sure if statements like the unions put out do very much to improve the situation. The current situation isn’t just a vote against management decisions, it’s essentially a vote for/against having a job because when the lights go out all employees are out on the street. Top Management such as union bosses and airline managers will almost always find a new position quickly but can a regular employee recover that fast? Unlikely.

It’s unlikely that the current proposal has a strong fan base in the Alitalia employee group but the decision wasn’t just about ‘vote against it because I don’t like it’. Not sure what their union representatives told these people but again, this was a rejection of their last chance. It’ll be very interesting to see if politicians in Italy will have the stomach to let Alitalia go into liquidation and essentially grounding.

Even though Alitalia just like a cat seems to have seven lives this once again means a very uncertain time ahead not only for the employees but also customers of Alitalia and the questions in such situations are always the same: How safe is my investment (tickets, miles) at this point?

I have mileage in Alitalia’s frequent flier program MilleMiglia – are they safe?

Alitalia Millemiglia or more officially Alitalia Loyalty S.p.A is part of Global Loyalty Company (GLC) with Etihad actually owning a 75% share of the company. It is independent of Alitalia itself and in fact valued at a much higher rate than Alitalia itself. The currency in these accounts should be safe but it’s still a bad feeling to bank mileage with a bankrupt airline and of course the conditions of such programs can always be amended. If all of a sudden MilleMiglia says awards will be 10x as expensive starting a future date then there is very little customers can do and customer loyalty towards an already grounded airline isn’t a factor to consider anymore.

I’d say the best choice is to use the miles up rather sooner than later regardless of the status of the mileage program itself. It always feels better to have a clean slate. Since the ticket’s will be issued on Alitalia stock it’s probably best to not book tickets too far in the future to avoid complications.

Should I continue to book revenue tickets on Alitalia?

Clear answer: No, not at this point. Especially if there are other options available that aren’t a looming headache. If you really have to book an Alitalia ticket then make sure you book it with a credit card to initiate a charge back in the worst case.

I have a booked and paid Alitalia Ticket (including codeshares) for some future date, should I be worried?

You should keep monitoring the situation closely and maybe also check if you can apply an insurance product that covers airline bankruptcies in an efficient manner and allows purchasing a new policy beyond the date of ticket purchase. If your ticket ticket is issued by another carrier for travel on Alitalia and a flight is not operating you have to contact the carrier that issued the ticket to get re-accommodated which is usually not a problem at all. The situation is different with Alitalia codeshares on other airlines or other airlines flights covered by a ticket originally issued by Alitalia. These airlines have no obligation to transport the ticket holder even though there have been instances in the past where airlines have helped out affected passengers but there are no guarantees.

Conclusion

The situation with Alitalia is a mess for all parties involved and has been for years. The airline was able to breathe a bit after Etihad (in my opinion) overvalued MilleMiglia to be able to invest €112.5 million into Alitalia but that cash was also burned through quickly. It’s no secret that Etihad’s expansion and investment policy through financially weak European airlines wasn’t a large success (one could argue exactly the opposite) and Alitalia is an example of it. Eventually their involvement with Etihad wasn’t able to salvage the carrier that constantly has the sword of union action dangling over it’s head.

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