Alitalia on brink of liquidation

Alitalia may cease flying this week as administrators and unions continue last-ditch talks on a rescue, in what it would be the biggest airline collapse since the failure of Swissair in November 2001.

Italian civil aviation authority ENAC said it would withdraw Alitalia’s operating licence within days unless there is a rescue plan. The airline’s temporary operating licence is due to expire in any case on October 2.

Alitalia entered bankruptcy protection at the end of August, but a rescue deal brokered by Italian prime minister Silvio Berlusconi foundered on union opposition. The carrier is heavily in debt, has mounting losses and has been up for sale for two years.

The deal would have seen a consortium of Italian-owned businesses buy the government’s 49.9% stake in the airline, slash its operations and merge the remainder with domestic carrier Air One. Berlusconi had earlier opposed a straightforward takeover by Air France-KLM agreed in the New Year.

The carrier cancelled 30 flights last Friday, blaming technical difficulties, but continued to operate most of its schedule. Administrators have said they will continue to operate services until cash runs out – an outcome likely to coincide with the loss of the carrier’s licence.

The buy-out consortuim is believed to have plans to launch a smaller replacement airline if Alitalia collapses and merge it with elements salvaged from a liquidation.

The government appeared to have won union agreement to 5,000 job losses by offering generous redundancy terms, but has since withdrawn the deal. However, unions have refused new, wage-cutting contracts for remaining staff.

Police raided Alitalia’s offices last week following a complaint by consumer representatives and the European Commission is investigating whether recent state aid to the carrier was illegal.

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