Alitalia Faces Shutdown

World Traffic Online(8/9/2008)

Alitalia was facing a shutdown today after unions rejected new job contracts in a rescue plan to save Italy's bankrupt national airline.

Five unions representing pilots, ground employees and attendants dismissed the contracts as "unacceptable" after three hours of talks this morning with an investor group seeking to create a slimmed down "new" Alitalia.

The carrier filed for bankruptcy on Aug. 29 to set in motion a government-sponsored rescue after it failed to attract a buyer.

Alitalia, which is 49.9-percent owned by the Italian government, said it is losing around $1.5 million a day and will soon run out of cash.

The unions also were angered by confirmation by the investor group that it does not plan to take over the bankrupt's carrier's air-cargo business. The freight operation cannot compete globally as it is half the size of the world's 15th-largest air-cargo carrier, Rocco Sabelli, the next CEO of the "new" Alitalia, said.

Labor minister Maurizio Sacconi said cargo, along with other businesses, including aircraft maintenance, would be outsourced.

The government administrator overseeing Alitalia's bankruptcy has warned the unions and the investor group must reach agreement by Thursday or the carrier risks being liquidated. The two sides were expected to resume talks later today.

Miro Radici Finance, a private Italian investment company, and Equinox, a Luxembourg-based investor group, reportedly are interested in buying Alitalia's cargo business and run it out of Milan's Malpensa airport in the heart of Italy's industrial belt. The unit's five MD-11 freighters operate services to the United States, India, China, Japan, South Korea and Africa.