September 2, 2008
Alitalia Faces Bankruptcy
By ARIEL DAVID
Italy's state-run airline is more than $1 billion in debt.
ROME -- Alitalia said Friday it has sought bankruptcy protection, taking the first step in a plan to reshape Italy's unprofitable and debt-laden national carrier.
The company said in a statement that its board had asked the government to appoint an administrator and had declared insolvency to a Rome court.
Alitalia has been losing some $3 million a day -- hurt by labor unrest, competition from budget airlines and high fuel prices. Its shares have been suspended from trading since June.
The airline said its net debt at the end of July amounted to $1.73 billion. The figure does not include a $442 million loan that the government granted in April to keep the cash-strapped carrier flying.
Following Alitalia's announcement, the government named Augusto Fantozzi, a tax law expert and former finance minister, as the company's administrator.
Fantozzi served as economy minister in 1995 in a government headed by Lamberto Dini and then as minister of foreign trade in Romano Prodi's Cabinet a year later.
The government and others involved have been secretive about the negotiations to save the state-run carrier, but the plan reportedly calls for the breakup of Alitalia into two parts.
The profitable assets would be taken over by a group of Italian investors ready to inject $1.5 billion into the airline under the reported plan. The other assets will be spun off into a separate company for liquidation.
The plan is the latest attempt by the government to sell its 49.9 percent stake in the loss-making airline following a failed bid by Air France-KLM earlier this year.
On Thursday, Premier Silvio Berlusconi's government approved key changes to the country's bankruptcy-protection law, tailoring it to Alitalia's immediate needs.
The decree passed at a Cabinet meeting allows for the breakup of the company and gives the administrator the power to sell off assets through private or exclusive negotiations.
It also makes exceptions to Italy's antitrust regulations, a move that could pave the way for reported plans to combine Alitalia with Air One, Italy's second largest airline.
A group of 16 Italian businessmen has stepped up to invest in the new company, headed by Roberto Colaninno, the chairman of motorcycle maker Piaggio. He is expected to become chairman, while Rocco Sabelli, a veteran executive who has often worked with Colaninno, is the designated chief executive.
Air One's head, Carlo Toto, also figures among the group of investors.
The possibility of a combination of the two biggest Italian airlines has raised antitrust concerns, especially because the resulting company would have a virtual monopoly on the highly traveled Rome-Milan route.
The plan could also raise concerns at the European Union, which is already investigating whether the government's loan in April broke EU rules that limit public assistance for companies.
In Brussels, EU officials said Thursday they were reviewing a draft plan.
Saving Alitalia has been a priority of Berlusconi's government since he returned to power. The conservative leader has stressed that the new Alitalia would remain in Italian hands.
Originally published by ARIEL DAVID Associated Press.
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