Alitalia to slash 5000 jobs

MANAGEMENT at the Italian national airline Alitalia put forward a rescue plan today to trade unions that foresees slashing 5000 jobs and splitting the struggling carrier into two in order to keep it aloft.

The company confirmed it foresees laying off 450 pilots, 1050 cabin crew, 1440 maintenance and 970 ground staff as part of efforts to stem losses, which hit E330 million ($575 million) in the first quarter of this year.

The layoffs would affect nearly one in four workers at the airline, saving the company an estimated E315 million over 2005 and 2006.

Management said it plans to achieve E830 million in savings by the end of 2006, reaching E1.027 billion by the end of 2008.

The rescue plan would also split the company in two - Alitalia Fly managing air transport activities, with 7800 staff, and Alitalia Service handling the ground service business with 8500 staff.

The state-controlled airline says it could go bankrupt within a month if it does not receive a E400 million bridging loan to relieve its critical cash shortage.

The unions hold the key to whether Alitalia receives the government-guaranteed loan, but they have voiced opposition to any rescue plan seen to penalise the interests of the airline’s 22,000 workers.

The nine unions involved in the talks will meet Tuesday to prepare a joint response, Fabrizio Solari, head of the CGIL transport union said, adding that fresh talks with Alitalia management would take place later in the day.

The pilots’ union Anpac have said it would not be possible to maintain the current number of flights with 450 fewer pilots.

The CUB cross-sector union warned that staff would resist the plans, threatening massive strike action such as that seen earlier this year at Rome-Fiumicino international airport.

Company chairman and chief executive Giancarlo Cimoli has set a September 15 deadline to strike a deal with unions on a rescue plan for 2005-08, a condition for obtaining the crucial bridging loan.

The unions say they are ready to accept measures to increase productivity but say management must also find ways to increase revenues and activity.

Alitalia has already said it plans to transfer 250 pilots and 500 flight attendants from Rome to Milan, where it does most of its business. About 11,000 Rome-based staff currently commute to Milan, at a high cost for the airline.

The rescue plan also includes a further round of privatisation, reducing the Government’s stake in Alitalia from 62.4 per cent to below 50 per cent over 12 months.

In 2007-2008 the airline plans to acquire seven new long-haul aircraft, bringing the total to 34, as well as adding 12 medium-range craft to take its total to 162.

Alitalia previously said it would have sufficient financial resources to operate until the end of March 2005 if it obtains the bridging loan.

The airline also said that an announced capital increase had to be carried out by March and that the proceeds had to be sufficient to finance planned investments as well as a convertible bond expiring in 2007.

According to financial analysts, Alitalia is likely to go out of business by spring 2005 unless it can put together a major restructuring package combining a capital hike in the region of E1-2 billion with wide-ranging cost and staff cuts.

Like its rivals, Alitalia is suffering from high oil prices that are in part responsible for a predicted loss this year on a par with the loss of nearly E520 million it suffered in 2003.

Still reeling from the massive crisis that hit the airline industry after the September 11 attacks, Alitalia has been struggling amid cutthroat competition from discount carriers and consolidation among established players. In late April and May the company was hit by a series of strikes that grounded 1500 flights.

The company has posted an annual profit only four times in the last 16 years. Last year it reported a net loss of E517 million. Its debt stood at E1.6 billion at the end of June, up E220 million since the end of 2003.

The Government won EU approval of the rescue loan in July. The loan was the Italian government’s only remaining way to aid Alitalia without breaching EU rules on state aid.

Premier Silvio Berlusconi’s government has repeatedly threatened to let the airline collapse unless unions accept the cuts. (AP,AFP)

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