Alitalia is treading a fine line as it finalises its new restructuring plan, trying to avoid the attentions of Brussels over its capital injection and further conflict with its unions.
At presstime, the Italian flag was considering a report on Alitalia's restructuring drawn up by an independent financial consultant chosen by the unions, while continuing talks with labour representatives about cost cuts.
Details of the reorganisation and of any capital injection were due by 15 December. The carrier should be looking for up to L2,500 billion ($1.6 billion) according to the report. Of this L1,500 billion will be a combination of new capital from state-run parent IRI, plus bank loans charged at market interest rates. The remainder of the money will come from the Aeroporti di Roma sale and the proposed sale of the carrier's headquarters - each are expected to fetch about L400 billion.
The capital will help to reduce the carrier's debt burden, which currently costs it L450 billion in annual interest payments. Alitalia's long term debt currently stands at L5,000 billion and management is looking at its fleet requirements to cut that further. Airbus confirms it is in discussions with Alitalia about postponing delivery of an unspecified number of A321s currently scheduled for delivery in 1996. The manufacturer has already delivered 10 of the 40 on order.
The proposed IRI injection could attract the attention of the European Commission says Giorgio Scoppetta, director of civil aviation international for the ground and flight crew union FIT-CISL. 'The only trouble with [the capital injection] is that they will need approval from the European Commission,' he says.
Scoppetta says Alitalia has insisted it must retain its freedom to expand capacity and routes, which would certainly be capped should the Commission consider the injection state aid. Rumours are already circulating that the Commission is assessing whether the sale of Aeroporti di Roma to IRI subsidiary Cofiri is considered state aid.
On top of the battle with the Commission, Alitalia must still persuade the employees of the need for further cost cutting measures - something the report does not focus on. Primary among management's concerns will be the pilots' claim that former managing director Roberto Schisano authorised a L28 million annual salary increase. Chief executive Renato Riverso refuses to accept this claim. Management will need to tread carefully on this issue, as flight attendants agreed salary freezes in July 1994 and the ground crew have delayed their contract renewal negotiations until January to give Alitalia time to sort out the reorganisation.
In its early December talks with the unions, Alitalia said it was looking at reorganisation of the fleet and route network and for cost cutting measures. Manrico Mazze from the transport union FILT-CGIL says the carrier has told cabin crew their costs must fall by 30-40 per cent. 'Our costs are obviously higher than other European Union member states. We have to find a way to lower costs without lowering salaries,' says Mazze.
He also rules out increases in productivity, which he claims now meets the European industry average. Instead he says there will need to be some employee rationalisation and cutbacks on perks. Mazze rejects the pilots' pay claim, stressing: 'Every worker must give something to the company.'
Sara Guild
Source: Airline Business
