The Italian government has signed off a decree in the first step towards the long-awaited privatisation of Alitalia just as the carrier unveiled a plan to reverse its ailing fortunes.
It may have been a long time coming, but the Italian government's decree to privatise Alitalia is seen by the carrier as a key move. "These steps cannot be delayed any longer and will enable the company to make the most of the opportunities offered by the system of alliances," says Alitalia chief executive Francesco Mengozzi.
Neither a mechanism for the privatisation nor a timescale is on the table yet, although the government says the sell-off could include a share swap, trade sale and public share offer. Alitalia has been told that privatisation and restructuring are necessary conditions before it can join alliance partner Air France in its merger with KLM.
At present, the treasury has a 62.4% stake in Alitalia, and the decree says that for the first time this can fall below 50%. The privatisation announcement boosted the carrier as it outlined its 2004-6 business plan, the first compiled in league with Greg Brenneman and his Turnworks consultancy, appointed in July to help Alitalia's management team with its turnaround strategy. Mengozzi told employees Alitalia has "to take steps which cannot be put off any longer".
The main thrusts are to boost revenues through "aggressive new commercial policies" by 18%, and to increase efficiency by cutting costs, and more specifically labour costs. Overall, Alitalia estimates it has 3,100 excess staff out of its total workforce of nearly 21,000. Over the course of the plan, Alitalia will cut 1,500 jobs not involved in front line operations, and some 1,600 will be re-absorbed by increased activities. A further 1,200 jobs will be transferred to external contractors in an outsource drive that will mainly affect back office functions and IT.
By 2006, Alitalia aims to be making annual savings of €538 million ($633million) through these and a raft of other measures, including slashing distribution costs and renegotiating terms with suppliers.
On the investment side, the carrier will continue with its €1.2 billion fleet renewal, initiated in 2001. Alitalia intends to develop its network, growing capacity by on average 9% a year, in a strategy that retains its main airport bases at Milan Malpensa and Rome Fiumicino.
The plan is aimed at taking Alitalia from an expected €410 million loss this year to breakeven in 2004 and into profitability in 2005. The target is to reach an operating margin of 15-17%.
Source: Airline Business
