The European Commission (EC) has given the go-ahead for Alitalia's state-backed bridging loan, but with conditions attached. With its cash reserves running out fast, lobbying in Brussels by Alitalia and the Italian government helped the carrier gain EC approval for €400 million ($480 million) of aid in the form of a bridging loan. A delegation, including Italian transport minister Pietro Lunardi, the country's European Union affairs minister Rocco Buttiglione and new Alitalia chief executive Giancarlo Cimoli, asked transport commissioner Loyola de Palacio to approve the loan in July.
Alitalia said it needed the loan by the end of September as its cash reserves dwindle under continuing losses. By the end of June it had just €150 million in cash to hand. When approving the loan, the EC said it must be at market rates, be repaid within a year and was limited to what was needed to "manage the company". Cimoli has said that several banks are interested in participating in the loan.
The Italian government must also send the EC a liquidation or restructuring plan for Alitalia in six months. The carrier is preparing a business plan with this in mind. It is expected to include job losses and outsourcing, already flagged up in earlier plans, and the spin-off of various divisions into holding companies.
Despite objections from some carriers, most vocally British Airways, the ECsays the "aid is warranted on the grounds of serious social difficulties. There are 22,200 salaried staff as well as 8,000 other jobs linked to the company's future." Its decision to allow the aid does not conflict with the "one time, last time" principle, which applies only to restructuring aid, says the EC. In addition, Italy had assured the EC that its restructuring plan will not contain any further state aid.
The EC adds that it expects Alitalia to be privatised shortly. It says that the Italian government has given an undertaking to reduce its 62% stake in Alitalia to under 50% within 12 months.
Source: Airline Business
