As was widely expected, on Tuesday Italy’s national carrier Alitalia filed for its second bankruptcy in 9 years, after its board decided to formally ask the ministry of economic development to put the money-losing carrier, the partly owned by UAE’s Etihad Airlines, under special administration after workers rejected its latest rescue plan meant to unlock much-needed financing.
As discussed previously, a majority of the company’s workers last week voted against a restructuring plan that envisaged cuts to jobs and salaries, making it impossible for the loss-making airline to secure funds to keep its aircraft flying. In retrospect, many more workers will now lost not only much of their compensation but also their jobs, even if for the time being the airline’s flight schedule would remain unchanged.
Once Alitalia is put under administration, the Rome government will appoint one or several commissioners who will assess whether it can be overhauled – either as a standalone company or through a partial or total sale – or should be wound up.
A worst-case scenario was presented by Italy’s Economic Development Minister, who on Sunday said that a sudden collapse of the loss-making national carrier “would be a great shock for Italy’s economy.” Rome has given the crisis-hit airline a short-term lifeline, a bridge loan of up to €400 million to see it through a process whereby an administrator will decide if it can be sold as a going concern or should be liquidated.
However, it is the worst case outcome that has Italian government officials spooked. “A [sudden closure] would be a shock for GDP much greater than the scenario that we are looking at: a brief period of six months covered by a bridging loan from the government so as to find a buyer who could provide services that Italians need as travelers,” he said in an interview with Sky TG24 television.
Making matters worse, rival airlines have shown little interest in buying Alitalia and creditors have refused to lend more money after workers last Monday rejected the abovementioned rescue plan that would have reduced pay and cut 1,700 jobs. It is unclear how yet another “shock” to Italy’s GDP would reverberate across Europe, although even without this adverse development, Italy’s unemployment rose from 11.5% to 11.7% in March according to government data released earlier.