Alitalia — Linee Aeree Italiane S.p.A. (Italian for Alitalia - Italian Air Lines) (BIT: AZA10) is the flag carrier airline of Italy. Headquartered in Rome, it operates services to 24 domestic and 66 international destinations. Alitalia is the world's 19th largest passenger airline by fleet size. The airline's hub is Leonardo da Vinci Airport, Rome. Although Malpensa International Airport, Milan was one of Alitalia's hubs, it has been downgraded to a focus city with the transition completed by April 2008, leaving Rome as the airline's only hub. [2] Alitalia’s top 12 routes are all from Rome’s main airport where it has a 53% share of domestic flights and capacity. On these routes Alitalia faces head-to-head competition from at least one other airline on 10 of them, with only Naples and Bologna as monopoly routes.[3] On 17 March 2008, the Italian government approved a takeover bid from Air France-KLM. However on 2 April 2008 Air France-KLM withdrew from negotiations due to union demands.[4] On 29 August 2008 the airline filed for bankruptcy protection.[5] Under the new measures the airline will continue to fly as restructuring measures are carried out. Alitalia announced it only had enough fuel to keep flying until the end of 14 September 2008, with no fuel suppliers willing to give credit to restock, but the airline continues to operate.[6] Talks continue to find a buyer for the airline. Air France-KLM have agreed to buy a further 20% of the carrier, raising their stake to 22%.[7]
[edit] HistoryAlitalia was established on 16 September 1946 as Aerolinee Italiane Internazionali, more commonly known as Alitalia, an Italian portmanteau of the words ali (wings) and Italia (Italy). It started operations on 5 May 1947, in which year it carried over 10,000 passengers. The inaugural flight was with a Fiat G-12 Alcione, piloted by Virginio Reinero from Turin to Catania and Rome. The first international flight left a year later, travelling between Milan and cities in South America. On 31 October 1957 Alitalia merged with Linee Aeree Italiane and took on the name of Alitalia Linee Aeree Italiane. Alitalia is owned by the Italian Ministry of the Treasury (49%), other shareholders, including employees (49%) and Air France-KLM (2%).
President George W. Bush walks the red carpet with Pope Benedict XVI. Behind is "Shepherd One" a specially dedicated plane for the Pope belonging to Alitalia. (2008)
By the 1990s, Alitalia was carrying 25 million passengers annually. In 1997 it set up a regional subsidiary Alitalia Express and in 2001 became a member of the SkyTeam Alliance. In November 2003 Alitalia announced that it would cut 2,700 jobs over the next three years to prepare the airline for a merger with Air France and KLM. In April 2004 Alitalia acquired the bankrupt regional airline Gandalf Airlines to gain additional slots at several European airports, mainly in Milan (Linate) and Paris (Charles De Gaulle). Alitalia employed 18,182 staff as of March 2007.[2] Typically, the Pope flies on a chartered Alitalia Jet. The Pope's flight is often nicknamed "Shepherd One" by the press. [8] [edit] Financial situation – historyAlitalia has lost money for years owing to problems with pilots and crew members and labour difficulties, and to government and political interference with attempts to solve them. It has reported only one year of profit (1998) since its foundation in 1946. Alitalia reported net losses of more than €3.7 billion between 1999 and 2008. Previous state aid to Alitalia included some €1.5 billion in 1998 from the government of premier Romano Prodi. In 2002 Alitalia received a capital increase of €1.432 billion under the government of Silvio Berlusconi. In 2004 the Berlusconi government gave a €400mn 'bridge' loan to Alitalia. In 2005 the capital of Alitalia was increased by €1.6 billion, including an over-€500mn bond float issued with the promise of a return to profit in 2006. (Unfortunately the year ended with a loss of €626 million). The Italian government and some other organizations have invested €4.9 billion since 1998. In September 2004 the airline found itself in financial difficulties, with management saying it did not have enough cash to pay worker salaries past the end of that month. It announced plans to lay off 5000 employees and to split the company into two divisions, an airline and a ground services division. It also said it was reconsidering its alliance with Air France. Talks went on with unions for pay cuts and layoffs, in an attempt to keep the company out of bankruptcy and possibly liquidation. On September 24 2004, the company announced that it had reached an agreement with unions allowing access to a bridging loan from the Italian government. Alitalia's troubles had now become so severe that Consob, Italy's stock market regulator, required it henceforth to report monthly on its debt and cash positions. The government could in 2006 no longer offer support to the failing airline since it had been forbidden by the European Union to inject new capital. Therefore, as all other attempts to save the company had failed, the Italian government announced its willingness to lead Alitalia towards privatization by lowering its part of ownership in it. A public notification was given on January 2007, seeking a buyer who would acquire at least 30.1% of Alitalia, and also guarantee the airline's 18,000 jobs, domestic routes, and the Italian identity of the Alitalia brand, according to the tender document published on the Treasury Web site. Italy invited bids to be submitted by January 29, 2007. (Under Italian law, a buyer of more than 30% of a company must make a public offer to buy out the other shareholders.) In July 2007 the last of the bidders for Alitalia backed off, making the procedure fail. In September 2007, Maurizio Prato, at that time chairman, told senators in Rome "Alitalia is in a comatose state, it is in the intensive care unit". Further he said: "Personally, I am surprised by the general refusal to accept reality and by the fact that a company in this state does not have the possibility, even though it is listed on the stock market, to make autonomous decisions even if this is needed for its survival". An attempt was made to sell the 49.9% stake of the Italian government through a different procedure, involving the selection of a single major partner with whom to contract. On December 6, 2007, three parties (Air France-KLM Group; an investment group led by businessman and lawyer Antonio Baldassare; and a group composed by the Italian domestic carrier Air One and several banks) presented proposals to purchase Alitalia. The Board of Directors of Alitalia announced the Air France-KLM Group as the winner. In March 2008 the Air France-KLM Group offered a share swap of €0.10 per share, a total of €138 million. The Air France-KLM Group offered to pay €608 million for the convertible bonds issued by Alitalia. The company would also invest €1 billion in Alitalia by selling new shares of Alitalia. Air France-KLM Group intended to maintain the Italian identity of Alitalia and an Italian would have a seat on Air France-KLM's board. It would restructure Alitalia's flight network, basing the bulk of its operations at Rome Leonardo da Vinci Fiumicino Airport and cutting international flights from Alitalia's second hub, Milan Malpensa Airport. Air France-KLM would end Alitalia's freight service by 2010. The terms of the Air France-KLM Group of the March 28 draft agreement were (with a deadline of 31 March, 2008):
The fate of the rest (of a total of about 7,600) of the employees of Alitalia's maintenance subsidiary, Alitalia Servizi, was uncertain. The Board of Directors of Alitalia and the Italian government agreed to these terms; the unions did not. Raffaele Bonanni, the leader of one of Alitalia's main unions, CISL, denounced the agreement: "The government is delivering us naked to negotiate with Air France to the detriment of the workers, infrastructure, and the general interests of the country,". The pilots' union, ANPAC, which had agreed to the takeover in principle, called the French-Dutch offer "unacceptable". ANPAC especially disagreed with the plan to end the freight service by 2010. The talks with the unions over the takeover by Air France-KLM collapsed when the French-Dutch carrier refused to accept union demands, hours before a deadline to win their support was to expire. As a consequence Alitalia's chairman, Maurizio Prato, resigned on April 2 2008[9]. Air France-KLM formally announced on Monday 21st of April 2008 that the terms set for the take-over of Alitalia were no longer valid and that the offer was withdrawn. There most recently have been plans to merge the profitable parts of Alitalia into Air One. The newly formed airline would have a large fleet of Boeing and Airbus craft, and would offer both European and long haul flights. It is still unsure if Alitalia will remain in the SkyTeam alliance. There are plans to reduce pilots and crew members and to increase their work hours and salary. Alitalia crew are considered high maintenance,[citation needed] and the Italian Airline/Government can't continue supporting these values.
[edit] Situation[edit] FinancialAlitalia expects an extra €200 million (US$294 million) loss this year on top of the forecast €400 million (US$592 million) because of the increased cost of fuel, the newspaper Il Sole 24 Ore reported in January 2008. According to Edoardo Staunovo Polacco, a bankruptcy law lecturer at Bocconi University, "Alitalia is no longer able to stand on its own two feet... Either it must be saved by another party or it is inevitable it will go into special administration. It doesn't have any more money and cannot get any from the state".[4] Its shares were suspended following the collapse of the Air France-KLM deal, and the board was to decide on 8 April 2008 whether the company should go into special administration.[4]. The Board noted that on March 31, Alitalia's cash-to-hand and short-term financial credits (according to management figures) amounted to about €170 million, including the sum of €79 million arising from the sale of Air France KLM shares, but not including the fiscal credit of €69 million received on April 2. The Board reiterated Alitalia's need for substantial financial support, as forecast in this year’s budget and in the contract set up with Air France-KLM, and that only by means of such support would it be possible to regain the required confidence to pursue the Company’s business plan and hence to ensure continued operations. [23] , [24] The Italian government decided on 22 April 2008 to give Alitalia an emergency loan of €300m ($475m) in an attempt to stave off the airline's collapse. The outgoing administration of Romano Prodi agreed the lifeline with new Prime Minister Silvio Berlusconi, who was elected in office in April 2008. [25] Alitalia must prevent its capital from sinking below the threshold set by European rules. If Alitalia cannot meet this obligation, including safety guarantees, Italian aviation authorities could revoke Alitalia's license. The chairman of Italy's civil aviation agency ENAC, Vito Riggio, said "they have to see that there's continuity, among other things, for safety," and "They have to guarantee they have (financial) coverage for at least a year." Riggio told a talk show on state radio that ENAC could either revoke Alitalia's license or give it a provisional one if the airline cannot save itself financially. He did not give a time frame for any decision. The Italian government loaned Alitalia €300 million on 29 May 2008. The loan will be counted as Alitalia's own capital to prevent the total amount of Alitalia's capital from sinking below the threshold set by European rules. The European Union doubted the legality of this loan, as they had decided that Alitalia could not receive any form of state support until 2011. The EU announced on June 11 2008 that they would investigate the loan. An EU executive said, "As Alitalia has already benefited from rescue and restructuring aid, Italy cannot, in principle, grant it any more aid." The EU regulators said the loan of public money might give Alitalia an unfair advantage over competitors. They would check whether private investors would have loaned Alitalia this amount. Other companies will have a chance to send the EU their comments and they will examine the conditions of the loan. [26] The government of Silvio Berlusconi announced plans to sell Alitalia in May 2008, the third attempt since January 2007. The government asked Intesa Sanpaolo to come up with a plan to improve the airline's finances. This plan was presented in August 2008. The government issued also a decree in May 2008 that would exempt Alitalia from disclosing information on this sale to the market [27]. As a consequence the trade in Alitalia stock at the Borsa Italiana in Milan was halted indefinitely by the stock exchange authorities as of 4 June 2008. Intesa Sanpaolo devised the plan in co-operation with the Italian cabinet. The gist of this plan was that Alitalia would file for bankruptcy, and thus be protected from its creditors. The next step of the plan was to split Alitalia in two parts. One part would contain the debts and less promising parts of the company. This part will be liquidated; the Italian government stated that the holders of Italian shares would be compensated. It is not clear what this meant. The other part would contain the landing rights, pilots and some of the planes [28]. This last part was to be bought by a consortium of Italian investors, and to receive an investment of €1 billion, along with new management and the guarantee of the cabinet that the company would free of the old debts of Alitalia and would merge with Air One. This consortium was called CAI, Compagnia Aerea Italiana. Air One and Alitalia together employ 17.000 employees. Minister Sacconi stated that the new company would employ 14.250 employees. Based upon this statement about 3.250 employees would lose their jobs. The new company would hold a share of about 60 percent of the Italian market. The plan also envisaged a form of partnership with an unspecified foreign carrier. It is yet unknown how much the consortium would pay for the viable part of Alitalia. The plan needed to be approved by the Italian unions. In Brussels Silvio Berlusconi said that union approval was a necessity but "no" was hardly an option [29]. On Monday 8 September 2008, more than half of the workers' unions at Alitalia rejected the new productivity-linked contracts offered by CAI. These new contracts were a condition for the takeover to go ahead. The wage decrease of at least 25% was also not acceptable to the unions. The unions rejected the proposals after a meeting with Rocco Sabelli, the designated managing director, and labour ministry officials. The government set a deadline for acceptance by the unions as Thursday the 11th of September 2008. On Friday 12 September CAI broke off negotiations with the unions. CAI stated "that after seven days of meetings, there aren't the conditions to continue negotiations." [30] The Italian government convinced CAI and the unions to renegotiate during the weekend of 13 September 2008. The negotiations dragged on through Thursday the 18th. CAI improved their offer by decreasing the wage cut for the crew, and also the number of layoffs. Three of the nine unions accepted this offer, but six of them (including the unions of the crew and the pilots) did not. CAI set a new deadline of 15.50 Thursday 18 September. Some of the unions reacted with a proposal to renegotiate. On 22nd September CAI withdrew their buyout offer. [31] [32] Alitalia published a notice in four newspapers (3 Italian newspapers and 1 British) on Tuesday 23rd September 2008 seeking offers to buy any or all parts of its assets. [33] Prime-minister Silvio Berlusconi has forced a meeting on 25 September 2008 of Alitalia's unions and the Italian investor CAI. He hopes to be able to close a deal between CAI and the unions [34]. Berlusconi stated on September 24th that Italy needs a national carrier and that it is inconceivable that foreign carriers would be responsible for air transport in Italy. Berlusconi, said that Italy must "continue to have its own flag carrier," and that "there is no possibility of any foreign airline taking upon itself the burden and responsibility of all of Alitalia. This hypothesis doesn't exist and never has." [35] On Thursday September 25 the largest union CGIL agreed with the buyout plan of CAI. CGIL claims to have won some concessions of CAI, mainly no or less wage cut for the lowest paid workers. The negotiations continue to get the support of unions representing pilots and flight assistants. CAI has set a deadline for these unions by October 15. The Italian flight authority (ENAC) has withdrawn their threat to suspend the license of Alitalia since the risk of financial instability of Alitalia has now significantly decreased.[36]. On Monday September 29th the last union of Alitalia agreed to the buyout plan of CAI. The CEO of CAI said that Alitalia would start seeking for an international partner this week. [edit] Volare controversyIn December 2005, the bankrupt Volare Group (Volareweb, Air Europe) was put up for sale. Alitalia bid to buy the group (other bidders were Air One and Meridiana/Eurofly). Air One went to court claiming that Alitalia could not buy Volare as it had received state aid in the past. The TAR (Regional Administrative Tribunal) of Lazio tried to block Alitalia's acquisition of Volare Group but abandoned the attempt, claiming that Alitalia had repaid its €400 million loan and so there would be nothing stopping it from buying Volare Group. Air One also went to court, unsuccessfully. Alitalia created Volare SpA to buy the Volare Group. The airlines are getting closer to each other and Volare Group has started providing soft maintenance services for some Alitalia aircraft in Milan Malpensa airport. However, the Italian Consiglio di Stato (State Council) on 23 May 2006 has once again blocked the acquisition of the airline. It is not clear what is going to happen as Volare is in serious financial difficulties. On November 2, 2006 TAR court decided that the administrative procedure used by the Italian government to sell Volare to Alitalia was invalid. But the selling contract is still valid because the administrative court was declared incompetent about this topic. If Air One wants to obtain Volare it will have to go to the local civil court and ask it to declare that the selling contract is invalid. [edit] Malpensa hubIn 1995 Alitalia signed a partnership with KLM Royal Dutch Airlines which aimed at a merger. The aim of the partnership was to develop Malpensa as a hub, along with Amsterdam (which lacked enough landing slots to expand further) and Rome Fiumicino. The problem was that in Milan there are two airports: Milan Linate (close to city centre but small) and Milan Malpensa (far from city but large and expandable). The Italian Government planned to move all flights to Milan Malpensa, apart from Milan-Rome Fiumicino. The EU airlines went to the European courts, as they claimed that the development of Milan Malpensa and the closure of Milan Linate would provide an anti-competitive situation in favour of Alitalia. They claimed that Alitalia could go on feeding its Fiumicino hub from Linate but they could not. Furthermore they claimed that Malpensa was too far (40 km) and lacked the infrastructure to/from the city (the rail link would open a year after the opening of the hub). After many court disputes the EU decided to leave 33% of the flights at Linate until the rail link opened. KLM broke off the alliance with Alitalia; and Cempella (head of Alitalia) was replaced by Mengozzi, who had the role of getting Alitalia back on track. In 2000 he signed a 2% share exchange with Air France and in 2001 joined the SkyTeam alliance. In 2001 Alitalia renewed the ground handling contract with SEA. In September 2007, Alitalia announced that it would nearly halve its hub at Malpensa and instead focus on Rome-Fiumicino and move all intercontinental flights there. Until this announcement, Malpensa had been Alitalia's primary hub for intercontinental flights. The transition away from Malpensa and towards Rome-Fiumicino was completed by the end of March 2008. Minor intercontentinental destinations, which previously received flights only from Malpensa, henceforth received only flights from Rome-Fiumicino, or else were discontinued. [edit] Lawsuits and complaintsAlitalia filed a lawsuit against the website AlitaliaSucks.com in the US courts, claiming the violation of various trademark laws – the Anticybersquatting Consumer Protection Act, the Lanham Act, and the state common law of trademark. The corporation's bid to fine and silence the creators of the website was withdrawn when Public Citizen, a US national non-profit consumer advocacy organization stepped in to support the website's owners according to the First Amendment. In December 2005, Italy's antitrust agency fined Alitalia €30,000 for misleading consumers by advertising a round-trip flight tariff while showing only the price of a one-way ticket. The antitrust agency in a statement said the advertisement appeared on Alitalia's web site during May and June 2005. The European Court of Justice has in July 2008 rejected an appeal by Alitalia against the European Commission in a long-running inquiry into Italian state aid. The airline challenged conditions set by the commission in 2001 for the use of state aid in restructuring the company. The court ruling does not impose any new conditions on Alitalia and the commission considers the case settled. A statement: "the Court of First Instance dismisses Alitalia's action and confirms that the commission's decision of 2001 is valid". The court: "confirms the validity of each of the conditions imposed on Alitalia by the commission". These conditions were:
[edit] Alitalia ServiziCarlo Cimoli, after becoming President and CEO of the Alitalia Group, divided the group into two holdings to cut costs. Alitalia (referred to as Alitalia Fly) controls Alitalia Express, Volare SpA, Volare Airlines and Air Europe. Furthermore it controls 51% of Alitalia Servizi SpA which owns the following companies:
Alitalia Servizi also provides IT services for the Alitalia Group (which will be partly outsourced) and ground handling in London Heathrow. It provides passenger handling in Brussels, Athens and Frankfurt. Alitalia Servizi is 49% owned by Fintecna (State agency). By 2008 it could be sold as a whole or piece by piece as the agreements with the trade unions prevent Alitalia from selling Alitalia Servizi before 2008. [edit] Alitalia CargoEstablished in 1947, Alitalia Cargo became a member of SkyTeam Cargo in 2001. Alitalia Cargo is also a member of Cargo 2000, an IATA enterprise involving the biggest air cargo operators worldwide. Alitalia Cargo has a cargo fleet of 5 MD-11 freighters operating from Malpensa International Airport. Destinations are concentrated on strategic markets in Africa, China, India, Japan and the Americas. [edit] DestinationsAlitalia plan to maintain only 18 intercontinental destinations from 2009, and will resume former markets Beijing, Seoul, Rio de Janeiro and Dakar, they will also launch Shanghai which was previously served by Alitalia Cargo flights. [edit] FleetThe Alitalia fleet consists of the following aircraft as of March 2008:[2]
*Magnifica is the name of the Business Class offered on International medium-long haul flights. The Alitalia Cargo fleet consists of the following aircraft as of March 2008 [28]:
The average fleet age of Alitalia is 12.7 years as of March 2008.[37] [edit] MilleMigliaThe airline's frequent flyer program is named "MilleMiglia", and is part of the SkyTeam alliance program, allowing passengers to collect miles and redeem them with free tickets across the whole alliance. [edit] Incidents and accidentsSeven Alitalia flights have been hijacked, and 28 aircraft accidents/incidents involved Alitalia planes[38]:
[edit] References
[edit] See also
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