Alitalia Is Beginning The Process Of Filing For Bankruptcy

This shouldn’t come as a surprise. Alitalia has been in a terrible financial situation for a long time, though it has been especially bad lately. They’ve been on the verge of liquidation, but for political reasons got a new business plan approved by the board that would have kept them alive. However, employees needed to vote in favor of the agreement for it to be approved, which would include layoffs and pay cuts. Alitalia employees voted against it, which means that Alitalia is out of options.

The Italian government has insisted that Alitalia won’t be bailed out, aside from a sixth month bridging loan.

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Today Alitalia has announced that they’re beginning the process of filing for bankruptcy. Here’s the Alitalia’s press release:

However, the new business plan being approved was contingent upon layoffs and also employees taking pay cuts, and that’s something employees voted against. As a result, Alitalia is out of luck — their creditors won’t fund their new business plan (or more accurately they don’t have a new business plan, since it was contingent upon employees agreeing to it), the government won’t bail them out, and the airline will run out of cash in the coming weeks.

Alitalia’s shareholders meeting, convened today, noted with deep regret the outcome of the referendum among the employees. The negative vote has determined the inability to implement the relaunch and restructuring of the Company.

Italian shareholders and Etihad, based on the strong potential growth of the company, and on an industrial plan which included a structural cost reduction of which two thirds were not related to labor costs, were committed to recapitalise and finance the plan with EUR 2 billion.

This commitment was subject to an agreement with the trade unions, which was rejected by the employees in a referendum.

The Board of Directors, which convened after the shareholders meeting, having acknowledged the serious economic and financial situation of the Company, of the unavailability of the shareholders to refinance, and of the impossibility to find in a short period of time an alternative, has decided unanimously to proceed with the filing for “amministrazione straordinaria”  (extraordinary administration) in compliance with the Italian law.

Alitalia’s flight schedule will continue to operate as planned.

There are no surprises here, and there’s still no immediate impact. In the coming weeks and months we should learn the fate of Alitalia. Will they be bailed it out and kept independent (despite what’s being said now), will another airline buy them, will their parts be sold off to the highest bidder, or what?

Alitalia is still reassuring people on Twitter that it’s safe to book flights on them. A few days ago they posted the not-so-reassuring update that “Alitalia confirms that for the time being its flights and operations will continue as scheduled.” That really instills confidence in people. 😉

However, the past few days they’ve been posting messages that take out the “for the time being” part, and make it sound like all is good at Alitalia.

How do you guys see this ending?

Comments

  1. Even in US bankruptcy which allows a lot of contracts to be nullified and debts forgiven (pensions!) buying Alitalia whole would be hard to justify. I doubt Italian “bankruptcy” is that generous to corporations.

    My guess is it’s much more valuable for it’s routes and physical assets in pieces.

    Years ago when Delta “bought” Pan Am they did this; they only bought most of the routes, airplanes and facilities, not the whole company.

    The Gulfies are dumping airlines they co-own pretty quick. airberlin is in the same process where Lufthansa is leasing many planes and routes at a loss just to keep competitors out of Germany. Unlike others I don’t see Lufthansa rushing in to also do something here. Alitalia is a better fit for Air France and AirFrance/KLM needs expansion. Also IAG (BA) seems to buy anything they can to get as big as possible.

    Just don’t let Doug Parker around it.

  2. Having already lost their entire investment, I find it incredulous that Etihad would sink more money into this truly hopeless cause. Alitalia’s problems extend well beyond recalcitrant labor unions. The yield environment they’re in (Italy, has always been a low yield market) simply cannot sustain a high cost, full service, airline over the long term.

  3. Having never had the need (or desire) to fly Alitalia, I’m curious as to the general sentiment around its potential shuttering. Are those in the industry of the “good riddance, it’s about time” mindset, or – all lost jobs and shattered lives aside – is everyone hoping to see it keep its head above water. I think in the US most of us have a case of schadenfreude and would LOVE to see one (or all) of the legacy carriers go under just because they’re all so awful and need an “attitude adjustment” on how to treat passengers and employees.

  4. Its not just the yield. Italian trains are fantastic and very fast. Im super excited about the traveling on them later this year as well as obb in austria. High speed train is 10x better than ryan air or any other basic crap economy fair and avoids horrible traffic and sluggish immigration and ultimately puts you city center.

    Ive literally never had one problem on any train with reserved seats, ever. As for planes, I fly 10x less than Lucky does (although this year I may get up 50k miles living in Cambridge) but I have had dozens of mediocre flight experiences in the past 10 years.

    Wish we saw more reviews of those products. Obb business class train seats are ridiculous

  5. Any idea on what happens in situations like this on flights booked with miles?

    I booked AF flights using Alitalia for family. Most of the trip is on AF, with a single leg in Alitalia (apparently for a stopover, it needs to be MULTIPLE flying airlines, so adding an extra leg for no reason other then to add a stopover was the proper way to do it). Flight is middle of next month.

  6. Since this is a miles and points blog, Lucky in the event Alitalia is deep sixed, what happens to award reservations? If those won’t be honored, how would one get made whole again?

  7. @Niaj @LK
    Worst case scenario would be that your flights get cancelled and you don’t get your money/miles back (only on Alitalia ticket stock)
    In Europe bankruptcy works as follows: The money the get from selling the airline are split between creditors. The bigger the creditor the earlier the get their money. Customers are very small creditors and when it’s the turn of the customer to get their money there probably isn’t any left.

  8. My wife and I just flew Alitalia Magnifica Class JFK-FCO in April as a Delta Skymiles award and the flight was fantastic! Great crew, food, and seat. I don’t understand why they are not considered competitive – we would definitely fly them again.

  9. When an airline gives its staff paid days off every month for the mensturation cycle….No wonder the staff voted down the new plan!

    Lufthansa tried, now Ethihad. The writing is on the wall….

  10. QNiaj @LK
    Millemiglia (Alitaluas frequent flyer program) is not part of Alitalia. As Airberlin’s Topbonus owner of the program is Etihad, so it will not be affected by the bancuptcy directly. Just be aware of any Alitalia legs.

  11. That’s very interesting indeed, since quite a few folks book Alitalia flights through FlyingBlue given the easy transfers from Chase etc. An adventure up ahead!

  12. i do not see booking AZ tickets as a major issue as there is ofcourse the IATA pact that has been made a couple of years back that, when in the case of a bankruptcy, other airlines will take over their customers (be it at a very reduced rate) where possible.
    Having flown AZ a couple of times, i was not blown away by the service, state of their rome lounge or their metal. it was average, not too bad not “gulf” good. Having said that, the 6 times that i have flown az, i had about 5 times a delay of some sort.

  13. @Ric
    Paid menstrual leave is neither an AlItalia policy or Italian law. It was a proposal that went before the Italian Parliament but has not passed. Your comment is misogynistic and ignorant. I’d bet very few men would vote for an 8% pay cut and massive layoffs much less the 30% pay cut that was originally proposed.

    The restructuring will most certainly result in only retaining the profitable routes, resulting in a much smaller airline. Having lived and worked in Italy for many years, I’ve flown AlItalia many times, both domestically and on long haul international flights and found them to be a great airline and superior to the US3. Sadly they are wedged in a difficult market geographically and economically. They have a great high speed rail system within Italy and the intra-European competition with discount airlines has killed that segment. I’d love to see investors step in and buy the long haul routes and in a perfect world, partner with One World….. maybe a bit of a stretch but one can dream.

  14. Lucky you are currently quoting part of your own previous article on the Alitalia situation as beginning of the press release

  15. TWA, Pan American, Braniff International, Eastern Airlines, SABENA, Swissair, Canadian Pacific Airlines, VARIG, Olympic Airways, East African Airways…

    Lots of famous airlines have folded, and the world goes on. There will be life after Alitalia. And at least we’ll be spared those god-awful new red and green uniforms.

  16. Bankruptcy in Italy is no rose garden like Chapter 11 – it is more akin to Gotterdamerung, where nothing remains other than smoke and ashes.

    @ Donna – to say that AZ is better than flying US3 isn’t saying much. You could say that about pretty much every airline in the world apart from perhaps Air Koryo. As myself and others have observed, you could take regular trips between MXP and FCO and end up with more crew than pax. Might make for a more pleasant flight but hardly the ingredient for a successful airline. And the crew were very efficient at making best use of all those empty seats just in case the pax got any ideas.. like laying their uniforms etc across them.

    LH isn’t going to buy because they need to save cash in the kitty to fight off FR. It was Ryan Air that ate AZ’s lunch in their domestic market, which helped to push them over the edge. The difference is that LH has vastly more resources and firepower to stop FR and other LCCs from cannibalizing their home market.

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