Italy to meet Alitalia executives as 1,600 job cuts loom

Milan: As the new Italian government of Paolo Gentiloni hammers away at a rescue plan for beleaguered lender Banca Monte dei Paschi di Siena, it’s suddenly contending with another corporate crisis: the future of Alitalia.
Executives from key investor Ethiad Airways and Alitalia — which went bankrupt in 2008 after rescue attempts involving the state and private investors failed, and which teetered on the brink of collapse in 2014 — are set to meet Italian ministers on Monday, the carrier based in Abu Dhabi said in a statement Sunday.
The executives will discuss new restructuring measures with development and transportation ministers in Rome, according to three people familiar with the discussions. The plan could include as many as 1,600 job cuts, according to two of the people, who asked not to be identified before an official announcement.
Time may be running short. Less than three years after Etihad bought a 49 per cent stake as part of a plan to revive the Italian airline, Alitalia was notified in December by investors and creditors that it had 60 days to come up with a viable cost-cutting plan. Etihad Group CEO James Hogan and other shareholders are meeting with Italy’s ministers to discuss Alitalia’s next business plan, Etihad said in response to questions about the meeting.
Alitalia has also authorised Etihad to pump in an additional $231 million in funding via "semi-equity” financial instruments that lack voting rights, according to minutes of an extraordinary shareholders’ meeting for the Italian carrier held on Dec. 22. Alitalia CEO Cramer Ball will also attend the meeting.
New model
After reaching an agreement with shareholders, which include short-term financing deals with Italy’s two biggest banks, Intesa Sanpaolo and UniCredit, Alitalia plans talks with labour unions, suppliers, aircraft leasing companies and other partners on potential spending reductions, including a road map for job cuts, the Rome-based carrier said on Dec. 22. After losing almost 200 million euros ($211 million) in 2015, Alitalia’s deficit for last year could be near 400 million euros, two people said. Alitalia declined to comment.
Along with the job cuts, the new plan calls for a shift in business model away from the airline’s traditional schedule of short and medium-range flights toward a setup that would allow it to better compete with low-cost carriers, according to the people. Alitalia would also phase out unprofitable routes like Milan Malpensa-Rome, one of the people said.
"The next two months are critical,” CEO Ball, who has been in his post for less than a year, said in the Dec. 22 statement. Alitalia denied on Dec. 27 that Ball will leave the company in the next two months, following a report in daily Il Messaggero.
The plan to meet with unions comes after the carrier froze salaries at the end of 2016 before discussing a new labour deal.
"Two years ago we agreed on 2,000 job cuts as a condition for Etihad’s investment and now they can’t tell us again the issue is labor costs, we won’t give the green light to any lay-offs,” Claudio Tarlazzi, leader of the Uiltrasporti union, said by phone.
Etihad, whose stake purchase was part of a 1.76 billion-euro rescue of Alitalia, has vowed to transform the struggling carrier into a five-star airline.