Alitalia facing 'abyss', but still taking bookings

An eleventh-hour attempt to save loss-making airline Alitalia (website: www.alitalia.com) has collapsed, with the only viable group of investors withdrawing their bailout offer following union objections.

Italian Prime minister Silvio Berlusconi said that the airline is "facing the abyss" as a consequence of the failed deal, which the Italian Air Company described as a "catastrophe for Italian society".

And yet in spite of the looming crisis, Alitalia continues to take bookings, with the national carrier's website running a promotional deal targeted specifically at UK customers.

Alitalia currently has €30 to €50 million (£24 to £40 million) left in the bank, but it requires €70 million per month to survive. The airline continues to lose €2.4 million on a daily basis.

As many as 30,000 jobs will be lost either directly or indirectly if Alitalia collapses, while up to 15,000 passengers will be left stranded around the world.

Unions had until 15:00 BST yesterday (September 18) to respond to a bailout offer tabled by investor group CAI. The deal would have involved 3,000 job cuts as well as tough new working conditions.

Those concessions were regarded as necessary given Alitalia's desperately weak financial situation, which analysts say has been exacerbated by years of propping up from the state.

But six of the unions balked at the deal, pressing on with negotiations beyond the deadline and ultimately forcing CAI to withdraw its offer.

Speaking shortly before the investor group announced it was no longer considering a bailout, transport minister Altero Matteoli had warned: "There is no alternative - if we don't sign today, we are facing bankruptcy."

Mr Berlusconi was equally pessimistic once the news had broken. "The situation is crucial," he said. "We could be on the edge of a precipice."

Technically the airline had already declared bankruptcy on August 29, though the Italian government's 49.9 per cent stake had afforded it enough time to pursue one last-ditch attempt at securing protection from creditors.

Indeed, according to one analyst, earlier forebodings from the government could be little more than sabre rattling.

"From a political point of view, it's not possible to let Alitalia go bankrupt," Salvatore Provinzano of IlNuovoMercato told the Bloomberg network. "It's too big a part of the economy. I don't think this is the end."

Regardless of Mr Berlusconi's intention, however, many analysts believe the fate of Alitalia is now out of his hands.

EU rules ban him from pumping any more money into the failing airline - having spent €5 billion keeping it afloat since 1993 - and Italy's civil aviation authority has now said it will meet on Monday (September 22) with a view to revoking its temporary licence.

If that happens, the airline's fleet will be grounded immediately, and Alitalia will become the first major European flag carrier to go bust since Swissair and Belgium's Sabena in 2001.

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