Alitalia files for bankruptcy

Rome - Two years and four months after it began, on 1 January 2015, Alitalia’s adventure supported by Etihad has come to an end. Italy’s former flag carrier is once again in bankruptcy proceedings, for the second time in its history (it also happened in 2008). Three commissioners will lead the proceedings: Luigi Gubitosi, Enrico Laghi and Stefano Paleari. And to guarantee the company’s continued operation in the coming months, the government has granted a €600 million bridge loan. So everything will be as normal for passengers: the company promises that Alitalia’s flights and operations will not be changed at all and will continue according to plan. The government’s main concern was to ensure the company’s continuity.

At the end of a Council of Ministers meeting which focused on the Alitalia question, Prime Minister Paolo Gentiloni explained that he took action “not only at the explicit request of a portion of the shareholders,” but also as an “act of responsibility by those who must guarantee [the continuity of] some fundamental services.”

The decision to ground the aeroplanes today would have had “very serious consequences,” Minister of Economic Development Carlo Calenda repeated, recalling that Alitalia has “4.9 million standing reservations and carries two million passengers per month.” “It is one of the most serious challenges that the company has faced in its history, but we are sure that it will come out of this stronger,” commented Gubitosi, who has followed all the latest developments in the case.

The Government granted the company a “continuity bridge” under bankruptcy and an “expensive loan” of €600 million for six months, a situation that will not be extended, the Prime Minister repeated that there is no chance of re-nationalisation: “we have ruled it out from the beginning and we are ruling it out now.”

It is also unlikely that the State will put any more money into the company, as Calenda made clear: the €600 million, which are at market rate (Euribor +1000 base points) as determined by the E.U., “are the most that can be expected and that can be done.” The commissioners have a “clear” mandate, “broad spectrum”, but “limited” in time (to six months), as Calenda explained. He specified that they must be open to expressions of interest from potential purchasers in the short term.

The goal is to “work on an industrial plan to allow Alitalia to find partners that are capable of investing and curing its historical weaknesses which are not due to the presence of low cost airlines, but rather failed strategies,” said Minister of Transportation Graziano Delrio -. “We are convinced that the market can find investors who are interested and the State will do its part,” he added.

The unions, which see the chance to find alternatives to liquidation made possible by the policy of territorial continuity, hope that the work of the commissioners will not lead to a sale, but rather to a search for new investors and a subsequent relaunch of the company.

The decision by the company to request access to bankruptcy proceedings, which had already been sketched out one week ago by the meeting of the board of directors immediately after the victory of the “No” vote in the referendum, came in the course of a double meeting, first of the shareholders and then the board of directors, which was held in the morning by conference call.

The board, noting the company’s “grave economic situation in terms of finances and assets,” and the disappearance of support from shareholders and the impracticability of alternative solutions in the short term, unanimously decided to submit the request for bankruptcy proceedings.

The shareholders, whose assembly met just before this, expressed “great regret” over the success of the vote that “effectively precluded the relaunching and restructuring of the company,” and therefore indicated that they were prepared to finance the industrial plan for €2 billion. Alitalia’s Emirati partner, Etihad, also expressed its regret. Etihad took on ownership of 49% of the Italian company in 2014 with a €560 million investment: “We did everything in our power to support Alitalia as a minority shareholder, but it is clear that the company needs a profound restructuring on a vast scale to survive and grow in the future,” said the Abu Dhabi-based company’s chief, James Hogan, who in 2015 promised to make Alitalia a sexy, five-star company.