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Alitalia Imminent Collapse

Alitalia looks for last minute deal

14 September 2008

The Italian government scrambled for a deal with airline workers on Sunday in a bid to save Alitalia from imminent collapse.

With Alitalia's operating license in jeopardy and the likelihood that it will have to ground flights from Monday due to a lack of fuel, the airline's unions faced a stark choice between a rescue plan with job and salary cuts and pushing the carrier toward liquidation.

Labour Minister Maurizio Sacconi called the unions to crunch talks at 6.30 pm (1630 GMT). "I think there are reasons to be optimistic," he told reporters in a break between meetings.

Unions have so far rejected an Italian consortium's offer to buy profitable parts of the airline and relaunch Alitalia as a slimmed down regional carrier. But with liquidation the only obvious alternative, they appealed for a compromise.

"We are trying to get a solution to this saga and there are still many obstacles, but the climate is different and there is the awareness that there is no alternative to the deal," said Giuseppe Caronia, head of the UILT union.

"I am moderately and cautiously optimistic."

At Rome's Fiumicino Airport, several hundred Alitalia employees staged a 15 minute protest, temporarily blocking passengers' way to check-in desks of various airlines.

Once a symbol of Italy's post-war boom, Alitalia has for years suffered from political interference, union disputes, financial woes and most recently from high fuel costs -- which are weighing on airlines around the world.

Britain's third largest package travel operator, XL Leisure Group, grounded all flights on Friday after going into administration. Discount transatlantic carrier Zoom Airlines began bankruptcy proceedings last month.

Italy's civil aviation authority said on Saturday that Alitalia's operating license was at risk after the airline confirmed media reports that it was having trouble buying jet fuel from wary suppliers.

Alitalia is operating under a bankruptcy commissioner who has said the only alternative to the rescue plan is liquidation, a procedure he has held back from starting while talks go on.

Letting Alitalia collapse would be a huge political blow for Prime Minister Silvio Berlusconi who promised voters he would use his business contacts to find an Italian buyer for the airline.

With only a few hours remaining to agree a rescue plan, stakes were high for all concerned. La Stampa daily said there was a "firm belief that a collapse would be a serious blow not only for the government but also for unions, workers, employers and, in fact, the entire country".

The investor group CAI has said publicly it would not give any more concessions but La Repubblica said CEO Roberto Colaninno had improved his offer on salaries, reducing pay cuts to 20 percent, from around 25 percent.

In April, Alitalia's unions sank a deal agreed under the previous government to sell the airline to Air France-KLM, a deal that Berlusconi, then in opposition, said he would block if he came into power.

The state holds a 49.9 percent stake in the airline and its publicly traded shares have been suspended since June. Alitalia has not been profitable since 1999 and had nearly EUR1.2 billion euros (USD$1.68 billion) of debt as of July.

(Reuters)



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