Alitalia miracle solution promises to be controversial

Although Italian Prime Minister Silvio Berlusconi decided to postpone until September the announcement which was originally described as a “miracle” solution for Alitalia, the country’s badly indebted flag carrier, details of the plan have been leaked to the media. Britain’s Economist magazine ran a lengthy piece on aspects of the proposal to save the airline, and the information cited has been confirmed by sources. According to these plans, the Berlusconi government will propose that the airline be divided in two, with one half sold to private Italian investors and a second half to remain in public hands. This is seen as a non-conventional solution to Alitalia’s woes and the European Commission (EC)-which also criticized Italy for recently injecting €300 million into the airline in the form of an emergency loan-may also attack the newest plan, out of fear that it will simply allow government authorities to pump state funds into the airline in a more covert manner.

The state-controlled half of Alitalia would take on the airline’s €1 billion debt, while the new airline-which would also include part of AirOne, a rival Italian carrier-would receive an injection of capital amounting to €1 billion. The new company would also  take over around two thirds of Alitalia’s present workforce. Most analysts, as well as the Italian bank in charge of coming up with a restructuring plan, recognize that the only way for the “new” privately-held airline to be successful, is if either Lufthansa or Air France-KLM is convinced to invest in the carrier. While there is some hope that Lufthansa might be interested, convincing Air France to return to the negotiating table may be a long shot, after its original, unsuccessful bid at buying Alitalia earlier this spring.

Thank you to the Economist for the initial report.

www.alitalia.com