Alitalia starts bankruptcy proceedings

Alitalia SpA started bankruptcy proceedings for the second time in a decade, throwing the survival of Italy’s flag carrier in doubt after workers rejected job cuts and concessions linked to a 2 billion-euro (USD2.2 billion) refinancing plan.

Shareholders voted unanimously to file for insolvency administration, the carrier said in a statement following a meeting yesterday. Under Italian law, the government will appoint supervisors to turn around the company or order its liquidation, and may provide stop-gap funds to maintain operations.

Alitalia, which was mainly backed by Abu-Dhabi based Etihad Airways PJSC, last week said it had exhausted all options to stay solvent after workers nixed a plan involving 1,600 job losses. The cuts to its workforce of 12,500 employees may be even deeper under administration, as a rescue appears unlikely. Etihad, which owns 49 percent of the carrier, said it won’t extend additional funding.

“It is clear this business requires fundamental and far-reaching restructuring to survive and grow in future,” Etihad Chief Executive Officer James Hogan said in a statement. “Without the support of all stakeholders for that restructuring, we are not prepared to continue to invest.” 

Alitalia, which missed out on a round of consolidation that shored up other European flag carriers, has seen its standing further eroded since a previous bankruptcy in 2008. Etihad’s stake purchase, part of a 1.76 billion-euro rescue of Alitalia in 2014, was a major chance as the Gulf carrier sought to transform the struggling carrier into a five-star airline.

The plans never panned out as budget rivals Ryanair and EasyJet further ate into its position in Italy, and a wave of terror attacks in Europe hurt tourism in the region. With the insolvency filing, Alitalia’s board of directors “acknowledged the serious economic and financial situation of the company,” the airline said in the statement.

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. The Italian government has already ruled out a bailout.

While Etihad withdrew financial support, the Gulf carrier said it’s ready to work with Alitalia as a “commercial partner,” which effectively means that codeshare agreements continue. Etihad passengers booked on Alitalia flights can proceed with travel plans as normal, it said. Bloomberg