Italy's National Carrier Alitalia Files For Bankruptcy

Tyler Durden's picture

As was widely expected, on Tuesday Italy's national carrier Alitalia filed for its second bankruptcy in 9 years, after its board decided to formally ask the ministry of economic development to put the money-losing carrier, partly owned by UAE's Etihad, under special administration after workers rejected its latest rescue plan meant to unlock much-needed financing.

As discussed previously, a majority of the company's workers last week voted against a restructuring plan that envisaged cuts to jobs and salaries, making it impossible for the loss-making airline to secure funds to keep its aircraft flying. In retrospect, many more workers will now lost not only much of their compensation but also their jobs, even if for the time being the airline's flight schedule would remain unchanged.

Once Alitalia is put under administration, the Rome government will appoint one or several commissioners who will assess whether it can be overhauled - either as a standalone company or through a partial or total sale - or should be wound up.

Quoted by Reuters, James Hogan, the CEO of Etihad Airways, which bought into Alitalia during the latest restructuring in 2014, said the Italian airline required "fundamental and far-reaching restructuring to survive and grow in future".

"Without the support of all stakeholders for that restructuring, we are not prepared to continue to invest," he said in a statement.

Meanwhile, the carrier is losing about €1 million ($1.1 million) a day and without government support risks running out of cash by the middle of May. The government has already thrown it a short-term lifeline, a bridging loan of up to 400 million euros to see it through the bankruptcy process.

Rival airlines including Lufthansa and Norwegian Air have shown little interest in buying Alitalia and creditors have refused to lend more money, putting more pressure on the government to find a way to save the flag carrier.  The government has ruled out renationalising Alitalia, an airline that was once a symbol of Italy's post-war economic boom but is now struggling to compete at home against low-cost carriers Ryanair and EasyJet

Outraged at repeated bailouts that have cost taxpayers more than 7 billion euros over a decade, many Italians are urging the government to resist the political temptation to rush to its rescue again.
But with a general election due by May 2018, few Italians believe the ruling Democratic Party (PD) will stand by and watch Alitalia crash and its 12,500 workers lose their jobs.

A worst-case scenario was presented by Italy's Economic Development Minister, who on Sunday said that a sudden collapse of the loss-making national carrier "would be a great shock for Italy's economy." Rome has given the crisis-hit airline a short-term lifeline, a bridge loan of up to €400 million to see it through a process whereby an administrator will decide if it can be sold as a going concern or should be liquidated.

However, it is the worst case outcome that has Italian government officials spooked. "A [sudden closure] would be a shock for GDP much greater than the scenario that we are looking at: a brief period of six months covered by a bridging loan from the government so as to find a buyer who could provide services that Italians need as travelers," he said in an interview with Sky TG24 television.

Making matters worse, rival airlines have shown little interest in buying Alitalia and creditors have refused to lend more money after workers last Monday rejected the abovementioned rescue plan that would have reduced pay and cut 1,700 jobs. It is unclear how yet another "shock" to Italy's GDP would reverberate across Europe, although even without this adverse development, Italy's unemployment rose from 11.5% to 11.7% in March according to government data released earlier.

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WinstonSmith1984's picture

Government takeover. Issue Bonds. ECB buys the bonds. Everything is good.

Looney's picture

 

Today’s Italy has been run into the ground.

How many airlines went bankrupt during the 1,500 years of the Roman Empire?  ;-)

Looney

Dame Ednas Possum's picture

Socialism at its finest. 

 

 

Haus-Targaryen's picture

Arguably the worst airline in the entire world.  I'd rather fly Spirit Airlines, or refuse to give up a seat or ship a bunny rabbit on United than ever set food on an Alitalia plane ever again. 

I hope they liquidate, I hope everyone gets laid off and their aircraft sold at firesale prices.

 

MalteseFalcon's picture

A National airline is nothing more than a government vanity project.

They provide unacceptable service at an exorbitant price and still never make money.

They have their lovely EU don't they?

Merge all the European airlines into one, call it Euro-flot, and crash it into the alps.

While you're at it, set up a fight to the death among the European royal families to decide who is the King and Queen of Europe.

Machine gun the surviving losers.

Ghordius's picture

so you prefer to fly a "United, we'll punch you in the face" plane instead of an Alitalia plane?

lately, I witnessed a discussion of when "the customer stopped be King", particularly in airlines, and the group discussing it reached a conclusion: 

during the "Dot-Com Bubble"... in the US

I was laughing, and it ties very well with that other another phenomenon we were discussing today: stock markets going completely wild

the dogma here at times is that it is always the central bank's fault. my perception is that some people will find anything they can to defend irrational behaviour of stock markets, and will always be blind to their effects on the companies' behaviour

my point: a CEO that finds confirmation in the stock market does not need to find confirmation among his customers

it's either King Customer or King Stock Market. follow the bonuses, stock options and, ultimately, "the money"

ThisIsMadness's picture

When people stopped being held accountable for their actions, the world went to shit.

 

It is never my fault; it is always yours.

Serpiko's picture

still 10 times better than British Airways

Haus-Targaryen's picture

Outed as not having flown Alitalia recently ... 

PontifexMaximus's picture

Etihad won't be to happy about ur statement. Nevertheless, their money is already lost.

Just Another Vietnam Vet's picture

Makes UAL look pretty slick, eh. ?

Chapter 7 for Italys Airline ?? ..........if they have that over there.

Waiting for the next big ones...the banks will be like dominoes falling...then FIAT,  then the utilities,

 

Always wondered how Fiat got control of Chrylser... its a strange world.

GunnerySgtHartman's picture

Always wondered how Fiat got control of Chrylser

A sop to the UAW for their support of Obummer in 2008 ... just like the bailout of GM

Raffie's picture

Something, something, something in an Italian accent.

DAMN IT! I had something for this.

Dame Ednas Possum's picture

Yet another crap business that should be allowed to fail. 

Austrian Airlines too.  

Horrible airlines.

Appalling service where the customer is treated as nothing other than a burden by the arrogant, incompetent fools that work there. 

GunnerySgtHartman's picture

 

Appalling service where the customer is treated as nothing other than a burden by the arrogant, incompetent fools that work there.

The socialism version of winning.

jubber's picture

Ftsemib is naturally up of course when your National carrier goes tits up

JohnGaltUk's picture

More NPL's for Italy's Banks.

Ghordius's picture

as predicted by several pundits, the long search for "something, anything" in the eurozone has come, after so many "disappointments" back to Italy

back to the stage where people predict that the oldest bank of the world has only a few days to live?

meanwhile, I do not think that the Italian government will save Alitalia again. neither politics nor economy look this way

I expect a "soft"... crash. oh, and done in a way that will frustrate financial pundits, particularly those looking for a way to make some hay out of it

note... Etihad "and co.". note that the whole "Open Sky" treaties look like Brexit might go to change them

in short, I expect a lot of frustration

Hope Copy's picture

If you understood how Etihad operates.. they have no unions, the flight crew can have very long hours that would be illegal under the USA FARs.  They do a lot of 'contract work', Fillapino workers, and other types of domestics (and laborers).  Variety is the 'spice of life'?? [of the super rich].  And then there is the 'Mecca Express'.  Some of those airplanes only have to fly a few weeks a year to bring in a good profit. and sitting in the dessert, well they get inspected by the amount of hours.  Now maybe you are starting to get an understanding..  Plus the local 'bone-yard'..

NoDebt's picture

"to find a buyer who could provide services that Italians need as travelers"

OK, so Italians NEED these services, right?  Then this statement should not be the case:

"rival airlines have shown little interest in buying Alitalia and creditors have refused to lend more money"

 

Dame Ednas Possum's picture

They won't touch it as its a pox-ridden business employing countless socialists who believe themselves to be above serving customers properly. 

Leave it to die by the side of the road. 

 

Bludklot's picture

It will be killed by union instransigence, just as Eastern Airlines was killed by the Machinist's union. Alitalia has been on life support for years. There won't be any shortage of alternatives, suggesting that it will just die. http://aviationweek.com/commercial-aviation/amid-alitalia-woes-europe-co...

Funn3r's picture

So voting against getting your pay reduced is "Socialist"? hahaaha And how do individual employee political beliefs correlate with serving customers properly?  You need to sit down and think this through.

Justin Case's picture

I wonder if they plan to trim United's CEO pay check down a bit from $18 million for poor corporate performance or peck at the pay cheques of the people that actually do the grunt work at UA? They like to point the finger at the people that do the actual work there, than the coffee sippers in the mohogony offices and board rooms with multi-million dollar pay checks.

For some reason the debt serfs buy that BS that they make too much money and the CEO is worth millions moar than the grunts. We seem to like taking each other down, supporting the corporations and helping the working class get less, so there is moar coin for the top rung management. Wage descrepency between management and the laborer is at it's highest in merican history at just over 300:1. Top paid executive in the pharmaceutical industry is earning equivalent salary of $40,000.00/hr. Yup we are worthless compared to the Gods that run the corporations, why not blame them for the poor performance of the corporation instead of the petty earnings the grunts get? Oh ya, management is pro at shifting blame, shit flows down from the top.

Justin Case's picture

James Skinner, CEO of McDonald’s, for instance, made a total of $27.7 million in 2013, according to the data. Michael T. Duke of Walmart Stores Inc. hauled in $20 million in 2013, and Larry Merlo of the CVS Caremark Corp. had a salary of $31 million. Those figures are dwarfed by what Larry Ellison, the CEO of software company Oracle and the best-compensated executive in the country, made last year: $78 million.

To put those numbers in perspective, a minimum wage employee would have to work 1,372 hours to make what Duke earns in a single hour in his job at the helm of Walmart.

 

We have argued above that high CEO pay reflects rents, concessions CEOs can draw from the economy not by virtue of their contribution to economic output but by virtue of their position. Consequently, CEO pay could be reduced and the economy would not suffer any loss of output. Another implication of rising executive pay is that it reflects income that otherwise would have accrued to others: what the executives earned was not available for broader-based wage growth for other workers. (Bivens and Mishel 2013 explore this issue in depth.)

pparalegal's picture

Socialist Class Warfare serves no purpose except to extend the pain and elevate the next round of political leaders. Hopefully/ ideally  taxpayers are not forced to fund or eat at McDonald's, Walmart and the like when they fail and simply go bust. It is called capitalism. But that is so old school thinking these days.

Justin Case's picture

the economy would not suffer any loss of output. Another implication of rising executive pay is that it reflects income that otherwise would have accrued to others: what the executives earned was not available for broader-based wage growth for other workers.

The debt serf wages at 1999 levels is a constraint to economic growth and prosperity. The labor class had to borrow money to sustain their standard of living while the rich got richer and paid next to or no taxes on millions. The system should at least be equitable and moar equally distributed. Rather than moving jobs off shore to give jobs to foreign countries and corporate executives double digit pay raises. Noboby is asking to get paid for free, just to get a fair deal to keep up with the true cost of living and job security to plan yoar future. Right now the wealth is concentrated to the 1%. Their contribution to consumption will not create sufficient demand to grow the economy. The masses need money in their pockets to consome on a scale that creates sufficient demand to create jobs and prosperity for the nation. Importing cheap goods sends prosperity abroad.

Oxfam: Richest 1% own nearly half of world's wealth

At the start of 2015, Oxfam had warned that 1% of the world’s population would own more wealth than the other 99% by next year. Mark Goldring, Oxfam GB’s chief executive, said: “The fact it has happened a year early – just weeks after world leaders agreed a global goal to reduce inequality – shows just how urgently world leaders need to tackle this problem.

“This is the latest evidence that extreme inequality is out of control. Are we really happy to live in a world where the top 1% own half the wealth and the poorest half own just 1%?”

Blackfox's picture

Print MOAR fuckers....

joga bonito's picture

Governments can't run businesses

Secret Weapon's picture

It appears they are unable to run themselves let alone a business.  Yet they seem quite happy to tell us how to run our own lives. 

rejected's picture

"As discussed previously, a majority of the company's workers last week voted against a restructuring plan that envisaged cuts to jobs and salaries, making it impossible for the loss-making airline to secure funds to keep its aircraft flying"

"...after workers rejected its latest rescue plan meant to unlock much-needed financing."

Beginning to sound like Greece.

This is the natural evolution of debt.

The banks will own it all.

waspwench's picture

Was management asked to accept cuts to their jobs and salaries?

Cuts at the management level would probably be sufficient to keep Alitalia afloat (or aloft) but that won't happen.   Management is sacred.

Executive salaries are not simply out of control, they are ridiculous and it is time shareholders did something about them.   Twenty-five per cent of current pay would still be too much.

Whoa Dammit's picture

Whut ?  No one wants to fly with all their imported goat people? Must have been something to do with the complementary pre-warmed towels. 

lakecity55's picture

Let's hope they are not bought up by a US carrier, service would drop precipitously!

 

silverer's picture

But you can still buy tickets. You just won't get your flight. No big deal.

silverer's picture

It's just like a socialist to somehow pretend it's really just a person's decision, and not financial reality that's created the circumstances. They deny reality, and then vote themselves out of any possibility of keeping their job. Now they get their first lesson in what's real and what's pretend. Maybe they can pretend they're getting a paycheck and hand the pretend money to their grocery clerk and landlord. Socialism isn't just a system that doesn't work; it's a mind distorting evil, invented by evil people to take advantage of others.

Panic Mode's picture

It's a one way ticket, literally.

BlueHorseShoeLovesDT's picture

But, eveything is awesome?

strangeglove's picture

Fek, we are running low on black ink

DelusionsCrowded's picture

Union Wogs shot themselves in the balls , once again .

Hope Copy's picture

Pan Am  ..  TWA .  Ghosts of the past. Alitalia is doomed as a part 121 airliner..  Best sell off the big airplanes and restructure into a luxury part 121 and part 135 charter and get government backing for the grey planes (NATO conflict charter).  You may ask why the last part, well that gets rid of the union.  Nobody is going to insure flight crew going into a conflict zone, flying military ordinance, except a government  and in that case the crew is under martial law. 

  We all can understand Etihad Airways, they got in for being first in line for the prize pieces..  Mecca express and other things (goats, geese and swans).

RougeUnderwriter's picture

Start beating your passengers - you are too soft of an airline

aliens is here's picture

FK Greece and Italy just die already.

waspwench's picture

No, don't die.   Just get out of the EU and get your own currency back.

Publicus's picture

Make it so the workers own the company. Problem solved.

ali-ali-al-qomfri's picture

Always

Late

In

Taking-off

Aways

Late

In

Arrival

 

Butta Atta Leasta We Wonta Kicka You'a inada Face'.