The European Commission (EC)is on the verge of finally approving Italian Government aid for debt-ridden national carrier Alitalia.
The Commission has refused to accept Italian assurances that the L3,000 billion ($1.8 billion) required should be considered as a commercial investment.
Instead, Europe's transport commissioner Neil Kinnock has decided to term it "state aid" and attached tough conditions to the funding while at the same time reducing the amount allowed to around L2,750 billion.
Reports from Brussels say that Alitalia will receive L2 billion immediately - L1 billion has already been handed over without EC approval. The staged payments will mean that a further L500 billion is due for payment in May 1998, with the remainder being paid 12 months later.
The full amount will depend on the airline meeting several conditions. These are expected to involve manpower reductions of 1,200 - although Alitalia is proposing an employment freeze which would account for 500 workers it is about to hire.
Other conditions are reported to include the sale of Alitalia's stake in Hungarian carrier Malev and an undertaking not to acquire a holding in any other European carrier. Limits on the airline's ability to offer discounted ticket prices and limits on capacity growth will also be imposed.
The conditions extend to include Alitalia-controlled carriers Alitalia Team and Avianova (which is soon to have its name changed to Ali Express).
Another airline, Eurofly, in which Alitalia holds a 45% stake, is exempted because it is a charter carrier, leading to industry concerns that Alitalia will use the carrier as a means of avoiding the EC conditions.
Alitalia and the Italian Government are also expected to be ordered to open up Alitalia monopolies on non-EU routes.
Source: Flight International
