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Closer to a Resolution at Alitalia

Don’t cancel that flight on Alitalia quite yet. The airline’s unions have accepted an offer from the Italian government to keep the airline afloat: the CEO, Chairman and Board of Directors will be fired (or, as the Economist says it, sacked) and the airline will seek additional private investors. In return, the unions will agree that it will not hold additional work stoppages.

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  1. The Alitalia dilemma.

    Alitalia is 62% government owned.

    They posted profits in one out of the last 12 years. (1998)

    Bankruptcy and liquidation of Italy’s flagship airline would bear harsh social consequences.

    Alitalia is overstaffed with 21,000 employees, but Unions are unwilling to accept job cuts as a cost saving measure.

    Alitalia will be out of cash in less than three months.

    The Italian government gave Alitalia money in 1997 and 2002. This will not be the case now as it conflicts with the European Union rules.

    A bridge loan (paid back within 12 months, so unlikely), emergency aid or private investment appear to be Alitalia’s options for funding.

    Subjective Opinion:

    Pride, not logic, seems to be keeping the unprofitable airline in operations as it exists today.

    The government uses Alitalia for political advantage and June elections are around the corner.

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