Italian airline fights to stay aloft
Posted on Friday, April 4, 2008
Alitalia will keep flying — for now.
But the future of Italy’s flagship carrier was uncertain after Air France-KLM broke off takeover talks with unions over demands it said would prevent the airline from quickly making the company profitable again. Alitalia said it will tell the government by Tuesday whether it can survive.
Meanwhile, in Indianapolis, ATA Airlines shut down operations and stranded thousands of travelers Thursday when an unexpected loss of key charter flights and soaring fuel costs forced the carrier into bankruptcy.
Once the nation’s 10 th-largest air carrier, ATA entered bankruptcy for the second time in just over three years. The company had more than 2, 200 employees, and “virtually all” were told that their jobs were gone, company spokesman Michael Freitag said.
Alitalia’s unions signaled Thursday that they were willing to reopen talks, but there was silence from Air France-KLM. Alitalia’s board said after an emergency meeting that it “continues to consider the offer suitable for assuring Alitalia’s return to profitability.”
If it cannot resuscitate the takeover talks, though, the board has few options. It can request bankruptcy protection, but first must acknowledge that it cannot meet its financial commitments. Or it can try to hold on using its cash reserves — likely selling assets as it has been to stay afloat — until a new government is in place next month.
“The problem isn’t just a question of money,” said Oliviero Baccelli, an airline and transport analyst at Milan’s Bocconi University. “The problem is if the company loses its credibility, people won’t make reservations and the crisis grows.”
Alitalia said its board also decided to appoint Aristide Police, a prominent lawyer, as chairman to replace Maurizio Prato, who resigned in frustration on Wednesday.
Raising hopes that the deal still may be salvaged, union leaders said the proposals that sent Air France-KLM chairman Jean-Cyril Spinetta packing on Wednesday were not final.
“If Air France will change, we unions also will be more pliant,” Raffaele Bonino, secretary general of Italian union CISL, said on Radio Radicale.
Air France-KLM declined to comment on the unions’ calls for talks to resume.
Given the breakdown in negotiations, Alitalia said in a statement, its board studied the company’s financial situation and assets and will tell the government by Tuesday whether “there are the necessary elements to guarantee the company’s continuity.”
Air France-KLM’s offer valued the airline at about $ 216 million, about 20 percent of the stock market value at the time and much less than expected. It would have called for layoffs of around 2, 100 workers and closing the cargo unit and getting rid of some short-haul aircraft before adding new longer-haul planes.
In one of the most contested measures, Air France-KLM also planned to downgrade Milan’s Malpensa airport, using Rome’s Leonardo da Vinci airport as the main southern hub, complementing hubs in Paris and Amsterdam.
The collapse of the talks marked a setback to the Italian government’s 15-month effort to sell its 49. 9 percent stake in Alitalia before the company runs out of cash. Alitalia is losing nearly $ 1. 6 million a day, and has been selling off assets — including land and Air France stock — to help its cash flow.
Many of ATA’s passengers learned of the company’s collapse at ticket counters Thursday, where advisories were posted in the handful of cities ATA still served. About 10, 000 passengers flew ATA each day when operations were shut down, according to the airline.
“It ruins my vacation,” said Beatrice Martinez, who was trying to reach Guadalajara, Mexico, from Midway International Airport in Chicago. “I’m in shock. So I guess I’ll try to make other arrangements. Right now I just need to get to Mexico.”
ATA said in a statement that the cancellation of a critical agreement with FedEx Corp. for most of the airline’s charter business left it unable to offset exorbitant fuel prices.
That agreement gave ATA a significant share of the airlift contracts to fly military members and their families overseas, ATA said. FedEx told ATA that that agreement would end when the government’s 2009 fiscal year begins in October.
“This termination is a full year earlier than the term specified in a letter of agreement between FedEx and ATA,” the airline’s statement said.
FedEx officials could not be reached for immediate comment.
ATA retrenched in 2006 after emerging from bankruptcy, focusing on an increase in its military charter business. The airline operated approximately 50 commercial flights per day, mostly between Hawaii and four west coast cities — Oakland, Los Angeles, Phoenix and Las Vegas.
ATA announced last month that it would leave Chicago’s Midway Airport, which it had used as a hub since 1992.
ATA’s bankruptcy will also affect Southwest Airlines customers. The Dallas-based airline has a code-share agreement with ATA for travel to Hawaii.
Southwest said Thursday that it immediately began rebooking passengers with dates and times as close to the original travel plans as possible. Southwest said it would give priority to customers who are scheduled to travel in the next 14 days.
Information for this article was
contributed by Marta Falconi, Colleen Barry,
Tom Murphy, John Wilen and Chris Havlik of The Associated Press.
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