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The Italian government decided on the 22 April 2008 to give Alitalia an emergency loan of 300m euros ($475m) in an attempt to stave off the airline's collapse. The outgoing administration of Romano Prodi agreed the lifeline with new Prime Minister Silvio Berlusconi, who was elected in office in April 2008. <ref>[http://news.bbc.co.uk/2/hi/business/7362179.stm] BBC News</ref>
The Italian government decided on the 22 April 2008 to give Alitalia an emergency loan of 300m euros ($475m) in an attempt to stave off the airline's collapse. The outgoing administration of Romano Prodi agreed the lifeline with new Prime Minister Silvio Berlusconi, who was elected in office in April 2008. <ref>[http://news.bbc.co.uk/2/hi/business/7362179.stm] BBC News</ref>


Alitalia must prevent its capital to sink below the threshold set by European rules. If Alitalia cannot meet this obligation, including safety guarantees, Italian aviation authorities could revoke Alitalia's license. The chairman of Italy's civil aviation agency ENAC, Vito Riggio, said "they have to see that there's continuity, among other things, for safety," and "They have to guarantee they have (financial) coverage for at least a year." Riggio told a talk show on state radio that ENAC could either yank Alitalia's license or give it a provisional one if the airline cannot save itself financially. He did not give a time frame for any decision.
Alitalia must prevent its capital to sink below the threshold set by European rules. If Alitalia cannot meet this obligation, including safety guarantees, Italian aviation authorities could revoke Alitalia's license. The chairman of Italy's civil aviation agency ENAC, Vito Riggio, said "they have to see that there's continuity, among other things, for safety," and "They have to guarantee they have (financial) coverage for at least a year." Riggio told a talk show on state radio that ENAC could either revoke Alitalia's license or give it a provisional one if the airline cannot save itself financially. He did not give a time frame for any decision.


The Italian government loaned Alitalia 300 million euro on May 29 2008. The loan will be counted as Alitalia's own capital to prevent the total amount of Alitalia's capital to sink below the threshold set by European rules. Is is as yet not clear if the European Union will sanction this as they have decided that Alitalia cannot receive any form of state support until 2011.
The Italian government loaned Alitalia 300 million euro on May 29 2008. The loan will be counted as Alitalia's own capital to prevent the total amount of Alitalia's capital to sink below the threshold set by European rules. Is is as yet not clear if the European Union will sanction this as they have decided that Alitalia cannot receive any form of state support until 2011.

Revision as of 15:21, 3 June 2008

Alitalia
IATA ICAO Callsign
AZ AZA ALITALIA
Founded1946 (as Aerolinee Italiane Internazionali)
Hubs
Focus cities
Frequent-flyer programMilleMiglia
AllianceSkyTeam
Fleet size179 [1]
Destinations101
HeadquartersRome, Italy
Key peopleAristide Police (Chairman)
Websitehttp://www.alitalia.com
Airbus A321-100 lands at London Heathrow airport

Alitalia—Linee Aeree Italiane S.p.A. (Italian for Alitalia - Italian Air Lines) (BIT: AZA10) is the flag carrier airline of Italy. Headquartered in Rome, it operates services to 28 domestic and 74 international destinations. Alitalia is the world's 19th largest passenger airline by fleet size. The airline's hub is Leonardo da Vinci Airport, Rome. Although Malpensa International Airport, Milan was one of Alitalia's hubs, it has been downgraded to a focus city with the transition completed by April 2008, leaving Rome as the airline's only hub. [2]

On 17 March 2008, the Italian government approved a takeover bid from Air France-KLM. However on 2 April 2008 Air France-KLM withdrew from negotiations due to unreasonable demands from Alitalia's unions.[3]

History

Alitalia was established on 16 September 1946 as Aerolinee Italiane Internazionali, more commonly known as Alitalia, an Italian portmanteau of the words ali (wings) and Italia (Italy). It started operations on 5 May 1947, in which year it carried over 10,000 passengers. The inaugural flight was with a Fiat G-12 Alcione, piloted by Virginio Reinero from Turin to Catania and Rome. The first international flight left a year later, travelling between Milan and cities in South America. On 31 October 1957 Alitalia merged with Linee Aeree Italiane and took on the name of Alitalia Linee Aeree Italiane. Alitalia is owned by the Italian Ministry of the Treasury (49%), other shareholders, including employees (49%) and Air France-KLM (2%).

President George W. Bush walks the red carpet with Pope Benedict XVI. Behind is "Shepherd One" a specially dedicated plane for the Pope belonging to Alitalia.

By the 1990s, Alitalia was carrying 25 million passengers annually. In 1997 it set up a regional subsidiary Alitalia Express and in 2001 became a member of the SkyTeam Alliance. In November 2003 Alitalia announced that it would cut 2,700 jobs over the next three years to prepare the airline for a merger with Air France and KLM. In April 2004 Alitalia acquired the bankrupt regional airline Gandalf Airlines to gain additional slots at several European airports, mainly in Milan (Linate) and Paris (Charles De Gaulle).

Alitalia employed 18,182 staff as of March 2007.[2]

Typically, the Pope flies on a chartered Alitalia Jet. The Pope's flight is often nicknamed "Shepherd One" by the press. [4]

Financial situation - History

Alitalia has lost money for years due to labour problems and government and political interference with the attempts to solve them. It has reported only one year of a profit (1998) since its foundation in 1946. Alitalia has reported net losses of more than €2.6 billion between 1999 and 2005. The Italian government and some other organizations have invested €2.8 billion of fresh capital since 2002.

In September 2004 the airline found itself in financial difficulties, with management saying it did not have enough cash to pay worker salaries past the end of that month. It announced plans to lay off 5000 employees and to split the company into two divisions, an airline and a ground services division. It also said it was reconsidering its alliance with Air France. Talks went on with unions for pay cuts and layoffs, in an attempt to keep the company out of bankruptcy and possibly liquidation. On September 24, the company announced that it had reached an agreement with unions allowing access to a bridging loan from the Italian government.

Alitalia's troubles are so severe that Consob, Italy's stock market regulator, requires it to report monthly on its debt and cash positions.

Airbus A319-100.

The government could no longer offer support to the failing airline since it has been forbidden by the European Union to inject new capital. Therefore, as all other attempts to save the company have failed, the Italian government announced its willingness to lead Alitalia towards privatization by lowering its part of ownership in it. A public notification was announced on January 2007, seeking a buyer who would acquire at least 30.1% of Alitalia, guarantee the airline's 18,000 jobs, domestic routes, and the Italian identity of the Alitalia brand, according to the tender document published on the Treasury Web site. Italy has invited bids to be submitted by January 29, 2007. Under Italian law, a buyer of more than 30% of a company must make a public offer to buy out the other shareholders. In July 2007 the last of the bidders for Alitalia backed off, making the procedure fail.

In September 2007, Maurizio Prato, at that time chairman, told senators in Rome "Alitalia is in a comatose state, it is in the intensive care unit". Further he said: "Personally, I am surprised by the general refusal to accept reality and by the fact that a company in this state does not have the possibility, even though it is listed on the stock market, to make autonomous decisions even if this is needed for its survival".

An attempt was made to sell the 49.9% stake of the Italian government through a different procedure, involving the selection of a single major partner with which to contract.

On December 6, 2007, three parties (Air France-KLM Group; an investment group led by businessman and lawyer Antonio Baldassare; and a group composed by the Italian domestic carrier Air One and several banks) presented proposals to purchase Alitalia. The Board of Directors of Alitalia announced the Air France-KLM Group as the winner. In March 2008 the Air France-KLM Group offered a share swap of 0.10 euro per share, a total of 138 million euro. The Air France-KLM Group offered to pay 608 million euro for the convertible bonds issued by Alitalia. The company would also invest 1 billion euros in Alitalia by selling new shares of Alitalia. Air France-KLM Group intended to maintain the Italian identity of Alitalia and an Italian would have a seat on Air France-KLM's board. It would restructure Alitalia's flight network, basing the bulk of its operations at Rome Leonardo da Vinci Fiumicino Airport and cutting international flights from Alitalia's second hub, Milan Malpensa Airport. Air France-KLM would end the freight service of Alitalia by 2010.

The terms of the Air France-KLM Group of the March 28 draft agreement were (with a deadline of 31 March, 2008):

  1. that the possible consequences of a lawsuit by the Milan Malpensa Airport owners, Sea, will be dealt with by the Italian government.
  2. that the current and next government support this proposal.
  3. that the unions agree to the dismissal of 1,620 employees of Alitalia Fly: 567 pilots, 594 flight assistants, 121 foreign employees and 398 ground employees.
  4. that Air France-KLM will employ only 3,200 of the 7,600 employees of Alitalia's maintenance subsidiary, Alitalia Servizi, if they can dismiss 500 of these employees.
  5. that Alitalia's bulk flight network will be based at Rome Leonardo da Vinci Fiumicino Airport and the international flights from Milan Malpensa Airport will be stopped.
  6. that the Italian government agrees to a capital injection of 300 million euros in Alitalia to prevent the company of going broke; to be repaid from the raised capital after the takeover has been finalized.
  7. that the Italian government invests in the Rome Leonardo da Vinci Fiumicino Airport.
  8. that the Italian government guarantees the landing rights of Alitalia.
  9. that the relevant competition authorities authorize the proposal.

The fate of the rest (of a total of about 7,600) of the employees of Alitalia's maintenance subsidiary, Alitalia Servizi, was uncertain.

The Board of Directors of Alitalia and the Italian government agreed to these terms; the unions did not. Raffaele Bonanni, the leader of one of Alitalia's main unions, CISL, denounced the agreement: "The government is delivering us naked to negotiate with Air France to the detriment of the workers, infrastructure, and the general interests of the country,". The union of the pilots, ANPAC, which has agreed to the takeover in principle, called the French-Dutch offer "unacceptable". ANPAC especially disagrees with the plan to end the freight service of Alitalia by 2010. The talks with the unions over the takeover by Air France-KLM collapsed when the French-Dutch carrier refused to accept union demands hours before a deadline to win their support was to expire. As a consequence Alitalia's chairman, Maurizio Prato, resigned on April 2 2008[5]. Air France-KLM formally announced on Monday 21st of April 2008 that the terms set for the take-over of Alitalia were no longer valid and that the offer is withdrawn.

Net debt and net available funds

Table with Alitalia group’s net debt and net available funds
Date Net debt € billion Net available funds € million Reference Source Remark
31 March 2004 1.634 256 [6] Alitalia press release 30/07/2004
31 January 2005 1.776 80 [7] Alitalia press release 28/02/2005
31 December 2005 0.879 1131 [8] Alitalia press release 31/01/2006
31 December 2006 1.026 726 [9] Alitalia press release 28/01/2007
31 December 2007 1.199 367 [10] Alitalia press release 30/01/2008
31 January 2008 1.280 282 [11] Alitalia press release 29/02/2008
28 February 2008 1.368 180 [12] Alitalia press release 28/03/2008
31 March 2008 1.353 180 [13] Alitalia press release 30/04/2008 The debt has decreased since February 2008 for the sum of 79 million euros arising from the sale of Air France KLM shares and the fiscal credit of 69 million euros received on 2 April 2008.
30 April 2008 1.358 174 [14] Alitalia press release 30/05/2008
Table with Alitalia group’s results
Year Operating result Net result in mln euro Workforce on 31 December Traffic revenue in mln euro Reference Source Remark
2006 minus 466 minus 627 11,430 4,373 [15] Alitalia press release 27/05/2008
2007 minus 310 minus 495 11,172 4,354 idem idem


Financial situation - Current

Alitalia expects an extra 200 million euros (294 million US dollars) loss this year on top of the expected 400 million euros (592 million USdollars) because of the increased cost of fuel, the newspaper Il Sole 24 Ore reported in January 2008. According to Edoardo Staunovo Polacco, a bankruptcy law lecturer at Bocconi University, "Alitalia is no longer able to stand on its own two feet... Either it must be saved by another party or it is inevitable it will go into special administration. It doesn't have any more money and cannot get any from the state".[3] The shares were suspended following the collapse of the Air France-KLM deal, and the board will decide on 8 April 2008 whether the company should go into special administration.[3].

The Board noted that Alitalia's financial situation on March 31, the cash-to-hand and short-term financial credits (according to management figures) amounted to about 170 million euros, including the sum of 79 million euros arising from the sale of Air France KLM shares, but not including the fiscal credit of 69 million euros received on April 2. The Board reiterated Alitalia's need for substantial financial support, as forecast in this year’s budget and in the contract set up with Air France-KLM, and that only by means of such support will it be possible to regain the required confidence to pursue the Company’s business plan and hence to confirm continuity of operations. [16] [17]

The Italian government decided on the 22 April 2008 to give Alitalia an emergency loan of 300m euros ($475m) in an attempt to stave off the airline's collapse. The outgoing administration of Romano Prodi agreed the lifeline with new Prime Minister Silvio Berlusconi, who was elected in office in April 2008. [18]

Alitalia must prevent its capital to sink below the threshold set by European rules. If Alitalia cannot meet this obligation, including safety guarantees, Italian aviation authorities could revoke Alitalia's license. The chairman of Italy's civil aviation agency ENAC, Vito Riggio, said "they have to see that there's continuity, among other things, for safety," and "They have to guarantee they have (financial) coverage for at least a year." Riggio told a talk show on state radio that ENAC could either revoke Alitalia's license or give it a provisional one if the airline cannot save itself financially. He did not give a time frame for any decision.

The Italian government loaned Alitalia 300 million euro on May 29 2008. The loan will be counted as Alitalia's own capital to prevent the total amount of Alitalia's capital to sink below the threshold set by European rules. Is is as yet not clear if the European Union will sanction this as they have decided that Alitalia cannot receive any form of state support until 2011.

Airbus A320-200.

Volare controversy

In December 2005, the bankrupt Volare Group (Volareweb, Air Europe) was put up for sale. Alitalia bid to buy the group (other bidders were Air One and Meridiana/Eurofly). Air One went to court claiming that Alitalia could not buy Volare as it had received state aid in the past. The TAR (Regional Administrative Tribunal) of Lazio tried to block Alitalia's acquisition of Volare Group but abandoned the attempt, claiming that Alitalia had repaid its 400 million euro loan and so there would be nothing stopping it from buying Volare Group. Air One also went to court, unsuccessfully. Alitalia created Volare SpA to buy the Volare Group. The airlines are getting closer to each other and Volare Group has started providing soft maintenance services for some Alitalia aircraft in Milan Malpensa airport. However, the Italian Consiglio di Stato (State Council) on 23 May 2006 has once again blocked the acquisition of the airline. It is not clear what is going to happen as Volare is in serious financial difficulties. On November 2, 2006 TAR court decided that the administrative procedure used by the Italian government to sell Volare to Alitalia was invalid. But the selling contract is still valid because the administrative court was declared incompetent about this topic. If Air One wants to obtain Volare it will have to go to the local civil court and ask it to declare that the selling contract is invalid.

Malpensa hub

In 1995 Alitalia signed a partnership with KLM Royal Dutch Airlines which aimed at a merger. The aim of the partnership was developing Malpensa hub along with Amsterdam (which lacked enough landing slots to further develop) and Rome Fiumicino. The problem was that in Milan there are two airports: Milan Linate (close to city centre but small) and Milan Malpensa (far from city but big and expandable). The Italian Government planned to move all flights to Milan Malpensa apart from Milan-Rome Fiumicino.

The EU airlines went to the European courts as they claimed that the development of Milan Malpensa and the closing of Milan Linate would provide an anti-competitive situation in favour of Alitalia. They claimed that Alitalia could go on feeding its Fiumicino hub from Linate but they could not. Furthermore they claimed that Malpensa was too far (40 km) and lacked the infrastructure to/from the city (the rail link would open 1 year after the opening of the hub). After many court disputes the EU decided to leave 33% of the flights in Linate until the rail link would be opened.

KLM broke the alliance with Alitalia and Cempella (head of Alitalia) was replaced by Mengozzi who had the role of getting Alitalia back on track. In 2000 he signed a 2% share exchange with Air France and in 2001 joined the SkyTeam alliance.

In 2001 Alitalia renewed the ground handling contract with SEA.

In September 2007, Alitalia announced that it would nearly halve its hub at Malpensa and instead focus on Rome-Fiumicino and move all intercontinental flights there. Until this announcement, Malpensa had been Alitalia's primary hub for intercontinental flights. The transition away from Malpensa and to Rome-Fiumicino was completed by the end of March 2008.

Lawsuits and complaints

Alitalia filed a lawsuit against the website AlitaliaSucks.com in the US courts, claiming the violation of various trademark laws – the Anticybersquatting Consumer Protection Act, the Lanham Act, and the state common law of trademark. The corporation's bid to fine and silence the creators of the website was withdrawn when Public Citizen, a US national non-profit consumer advocacy organization stepped in to support the website's owners according to the First Amendment.

In December 2005, Italy's antitrust agency fined Alitalia €30,000 for misleading consumers by advertising a round-trip flight tariff while showing only the price of a one-way ticket. The antitrust agency in a statement said the advertisement appeared on Alitalia's web site during May and June 2005.

Alitalia Servizi

Boeing 777-200ER

Carlo Cimoli, after becoming President and CEO of the Alitalia Group, divided the group into two holdings to cut costs. Alitalia (referred to as Alitalia Fly) controls Alitalia Express, Volare SpA, Volare Airlines and Air Europe. Furthermore it controls 51% of Alitalia Servizi SpA which owns the following companies:

  • Alitalia Airport (100%): ground handling services in Rome Fiumicino, Palermo, Cagliari and London Heathrow (under the Alitalia Servizi brand). It provides passenger handling services in: Catania, Naples.
  • Alitalia Maintenance Systems (60%): maintenance services, it is 40% controlled by Lufthansa Technik.
  • Atitech (100%): maintenance services in Naples.
McDonnell Douglas MD-82

Alitalia Servizi also provides IT services for the Alitalia Group (which will be partly outsourced) and ground handling in London Heathrow. It provides passenger handling in Brussels, Athens and Frankfurt. Alitalia Servizi is 49% owned by Fintecna (State agency). By 2008 it could be sold as a whole or piece by piece as the agreements with the trade unions prevent Alitalia from selling Alitalia Servizi before 2008.

Destinations

Main article: Alitalia destinations

Fleet

The Alitalia fleet consists of the following aircraft as of March 2008:[2]

Alitalia Fleet
Aircraft Total Passengers
(Magnifica*/Economy) 		Routes Notes
Airbus A319-100 12 126 Domestic/International short-medium haul
Airbus A320-200 11 153 Domestic/International short-medium haul
Airbus A320-200 4 180 Domestic/International low-cost short-medium haul Operated by: Volare Airlines
Airbus A321-100 23 187 Domestic/International short-medium haul
ATR 72 10 66 Domestic short haul Operated by: Alitalia Express
Boeing 767-300ER 10 214 (25/189) International medium-long haul
Accra, Boston, Caracas, Chicago,
Dubai, Lagos, New York JFK, Newark, Toronto
Boeing 777-200ER 10 291 (42/249) International long haul
Buenos Aires, Los Angeles, Miami, New York JFK,
Newark, Osaka, São Paulo, Tokyo (Narita)
Embraer ERJ 145 14 48 Domestic/International short haul Operated by: Alitalia Express
Embraer 170 6 72 Domestic/International short haul Operated by: Alitalia Express
McDonnell Douglas MD-82 73 141
164 		Domestic/International short-medium haul

*Magnifica is the name of the Business Class offered on International medium-long haul flights.

The average fleet age of Alitalia is 12.7 years as of March 2008.[19]

MilleMiglia

The airline's frequent flyer program is named "MilleMiglia", and is part of the SkyTeam alliance program, allowing passengers to collect miles and redeem them with free tickets across the whole alliance.

Incidents and accidents

Seven Alitalia flights have been hijacked, and 18 aircraft accidents/incidents involved Alitalia planes[20]:

Alitalia Incidents and Accidents
Flight Date Aircraft Location Description Injuries
Fatal Serious Minor Uninjured
December 18, 1954 Douglas DC-6 New York City, New York Circled for 2 1/2 hours in fog; during the fourth landing attempt, the plane overshot the runway and exploded 26 0 0 6
771 July 7, 1962 Douglas DC-8 Chatrapati Shivaji International Airport, Mumbai CFIT 94 0 0 0
112 May 5, 1972 Douglas DC-8 Palermo, Italy Crashed Due To Inclement Weather 115 0 0 0
4128 December 23, 1978 McDonnell Douglas DC-9 Palermo, Italy
Punta Raisi Airport 		Crashed Into Sea
Short from Runway 		107 0 0 21
November 14, 1990 McDonnell Douglas DC-9 Zürich Crashed 46 0 0 0

References

  1. ^ "Alitalia - The Fleet". Retrieved 2008-03-01.
  2. ^ a b c "Directory: World Airlines". Flight International. 2007-03-27. pp. 72–73.
  3. ^ a b c "Alitalia to decide on April 8 on administration". Reuters. 2008-04-03.
  4. ^ Willey, David (2008-04-15). "Pope's US tour: Reporter's diary". BBC News. {{cite news}}: Check date values in: |date= (help)
  5. ^ [1]BBC news
  6. ^ [2] Alitalia press release 30/07/2004
  7. ^ [3] Alitalia press release 28/02/2005
  8. ^ [4] Alitalia press release 31/01/2006
  9. ^ [5] Alitalia press release 28/01/2007
  10. ^ [6] Alitalia press release 30/01/2008
  11. ^ [7] Alitalia press release 29/02/2008
  12. ^ [8] Alitalia Press release 28/03/2008
  13. ^ [9] Alitalia Press release 30/04/2008
  14. ^ [10] Alitalia Press release 30/05/2008
  15. ^ [11] Alitalia press release 27/05/2008
  16. ^ [12] Board of Airline Representatives In the Netherlands
  17. ^ [13] Press Release Alitalia 8 April 2008
  18. ^ [14] BBC News
  19. ^ [15]
  20. ^ ASN - Aviation Safety Database

See also

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