Kevin O'Toole/LONDON
A strong improvement in Alitalia's performance is fuelling optimism that the group could be back in profit this year and that the upturn will ease the way for European Commission (EC) approval for recapitalisation
Unofficial figures show that the airline group made a profit of L35 billion ($20 million)in March, after eight years of losses in the corresponding month, while the strong results are understood to have continued into April and May. The figures are raising expectations that the group could be on course to break even for 1997, or even make a small profit.
Alitalia has confirmed that the group lost L1,203 billion in 1996, after putting aside just over L900 billion to cover its restructuring programme, finally given the go-ahead a year ago, ending months of bitter union disputes. The deal included the setting up of a low-cost Alitalia Team operation, based around the group's Avianova regional subsidiary, in return for a 30%employee shareholding.
The group believes that the improvement in its results will strengthen its hand in negotiations with the European Commission (EC)over the injection of state cash from its state-owned parent, the giant IRI holding company. IRI has already pledged L1,500 billion, of which L1,000 billion was paid out in July to keep the airline afloat. The injection has already helped Alitalia to cut its debt mountain to L2,343 billion and so reduce interest payments.
IRI has also promised to participate in further recapitalisation as the restructuring plan progresses, which will bring the total cash injection to L2,800 billion.
Talks have been taking place with ECtransport commissioner Neil Kinnock since November, with the last meeting held at the start of June. Although there has been no official comment on the negotiations from either side, there are growing expectations in Alitalia that a decision could be close, possibly by the end of July.
Alitalia still appears to have hopes of persuading the EC that the cash injection is a commercial investment, so avoiding the tough conditions likely to be attached to a state-aid ruling. In particular, it is understood to be keen to avoid further cut-backs in the network, deeply opposed by the pilots.
The airline argues that the recent upturn in its financial results demonstrates that the restructuring programme is already showing results. The programme has seen capacity cuts, with Avianova's five Fokker 70s returned to the bankrupt manufacturer and eight Airbus A300s taken out of service. The presence of Alitalia Team has helped reduce costs over much of the European network.
The results have also been helped by a pick-up in the Italian economy. In 1996, Alitalia, freed of industrial disputes, saw passenger numbers increase by nearly 11%, and growth is reported to have continued into this year.
Source: Flight International
