Alitalia, the Italian flag carrier that turned a profit last time in the late 1990’s, has today filed for bankruptcy proceedings after unions voted down a reorganization plan that would have cut wages and recapitalized the airline.
The administration has 180 days to come up with a plan to “rescue” the airline by selling it, somehow make it profitable gain or liquidate it if there are no other options. This 180 day period can be extended by 90 days. The Italian government has provided bridge loan to keep the airline flying for now.
Italians are turning sour over the airline too as the government has already used more than 7 billion euros over the past decade to save it.
Here’s an excerpt what CNBC wrote over the weekend (access the article here):
An opinion poll published on Friday, four days after Alitalia workers voted to reject a union-backed rescue plan proposed by management, shows that 77 percent of Italians believed the airline should be left to fail.
“It’s clear Italians are opposed to governments systematically running up deficits to deal with companies in crisis,” Natascia Turato, director of Index Research, said in a comment the firm posted online, along with its poll results.
Here’s an excerpt from Bloomberg (access the entire piece here):
Alitalia’s years of underperformance have diminished its standing within the Italian economy and the aviation industry. The carrier’s share of the Italian market slumped to 18 percent as of 2015 from 23 percent in 2007, according to an analysis by Ugo Arrigo and Andrea Giuricin of Milan Bicocca University. Ryanair Holdings Plc, Europe’s biggest discount carrier, now ranks No. 1 with a 23 percent share, up from 12 percent a decade earlier.
The administrators will take over the business and present a new strategy that may entail asset sales, reduced operations and job cuts aimed at making the airline viable within two years. If a turnaround isn’t possible the administrators may order the carrier to be liquidated.
Financial Times published a chart about airline profitability (access the piece here):
Independent (access here) wrote about the government’s view:
Italian finance minister Pier Carlo Padoan said last week that the government will not pump more cash into boosting the airline’s capital.
Alitalia is “a private company” and its fate is “in the hands of shareholders and management,” Mr Padoan told lawmakers in Rome on Thursday. Economic Development Minister Carlo Calenda on 30 April said he hopes the carrier can be sold as “a whole, not in pieces.”
This is more likely the end of Alitalia. Nobody has shown any interest taking over the airline after all the losses and numerous rescue attempts over the past two decades.
The 400 million euro bridge loan from the government won’t last long. The airline was already hemorrhaging half a million per day before this bankruptcy/reorganization. Considering that nobody sane would buy advance tickets from this airline now, the increased losses will start mounting fast.
Nobody wants to see an airline going under. Difficult to see why this airline should exist after the billions used to save it over the past 20 years haven’t been able to bring the airline back to sustainable profitability.