September 30, 2008

Alitalia Deal Clears Unions

An investor bailout of Alitalia won the grudging support of the last two unions Monday, ending difficult labor talks that at one point appeared to doom the airline to liquidation.

The two unions, SDL and AVIA, representing cabin crew members and ground workers, followed the example of other unions that had agreed to support a deal with CAI, a group of 16 wealthy Italian entrepreneurs and businesses.

Now CAI will shift its attention to finding a partner for Alitalia and press ahead with a plan to restart it as smaller airline by early November.

"We've signed the deal, but there's nothing to celebrate," said Antonio Divietri, the head of the AVIA union, who said workers had been left out "like a dog on a balcony."

"One in three of us will be laid off," he said. "There are people who are losing their jobs and suffering."

The reversal of fortunes for Alitalia was a victory for Prime Minister Silvio Berlusconi, who returned to power in May vowing to rescue the airline.

Alitalia sought bankruptcy protection in August under the weight of crippling oil prices and high labor costs.

CAI still faces other obstacles, including scrutiny from European Union regulators, but persuading the unions to support a plan that reduces pay and cuts more than 3,000 jobs was its biggest hurdle.

EU regulators, however, could still hold up the deal if they determine that it restricts competition or benefits from unfair government aid.

Air France-KLM and Lufthansa have shown interest in a restarted Alitalia as the airline sector consolidates under the pressure of tough competition and high fuel prices. The Italian government is saying that any foreign airline could hold only a minority stake.

"It's up to CAI to decide what's the best offer for our country, but it must be a minority," the industry minister, Claudio Scajola, said.

Originally published by Reuters.

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