Alitalia future hangs in balance as crisis engulfs sector

Troubled Italian airline Alitalia may starting grounding flights to save money, amid growing concerns about the impact of fuel prices.

The crisis at Alitalia came as British Airways chief executive Willie Walsh warned that 30 more airlines could go bust before Christmas.

The possible total collapse of Alitalia has come after thousands of holidaymakers were left stranded by the grounding of XL Leisure Group and travel experts have warned other airlines facing failure because of the credit crunch.

Alitalia, which has been in deep trouble for more than a year, said that it would cut back the number of its flights to save money so that it can pay its bills.

Walsh believes that this is the worst trading environment that the industry has ever seen.

“We have already seen 30 or so airlines go bust this year and it would be fair to expect a similar number of casualties worldwide over the next three to four months,” he said

Besides outstanding fuel payments, Alitalia also owes money to hotels where pilots and cabin crew stay during stopovers, and also to caterers that provide in-flight meals.  Alitalia has been losing more than £1 million a day and was bailed out earlier this year with a £300 million loan from the Italian government, which many other airlines said was illegal.

Italian administrator Augusto Fantozzi has been brought in try and save the airline from total bankruptcy but has faced fierce opposition from trade unions, with protests hitting airports and leading to flight cancellations.

Fantozzi has told unions that in order to save Alitalia, jobs must go and costs must be cut, but they have refused to accept his demands – pushing the airline towards complete collapse.

Pilots, especially, are refusing to change their contracts; some are seen the most lucrative in the airline industry with average working hours a year of 500 – 100 less than colleagues at Lufthansa and Air France.

A consortium of Italian airlines, CAI, has offered to step in and take control and Fantozzi has urged the unions to accept their proposal, but they have refused and walked out of talks on Friday.

Fantozzi said: “From Monday, flights will no longer be guaranteed because of problems over fuel payments. The situation is going downhill rapidly.”

A glimmer of hope came today when it emerged that some of the airline’s nine uniond had reportedly signed a draft agreement with CAI in a last ditch effort to save the carrier.

Prime minister Silvio Berlusconi has blamed the airline’s problems on the “left wing unions” and said that he would personally be upset if Alitalia collapsed.

He has urged Maurizio Sacconi, the welfare minister, and Aletro Matteoli, the transport minister, to try and help mediate between the unions and the consortium. In order to survive Alitalia must slash at least 5,000 of its 20,000 jobs

The CAI rescue plan would lead to a £700 million investment and a merger with Italy’s second airline, Air One, as well as a partnership with a foreign carrier.

Earlier this year, Air France expressed an interest in taking over Alitalia, but the talks collapsed and in recent days there has been speculation that BA and Lufthansa were also interested.

Alitalia would be the first European flag-carrier to go bust since Sabena and Swissair in 2001.

Meanwhile, Alitalia call centres were flooded with worried calls from passengers who held tickets, with one operator said: “No one has told us anything, we are just telling people not to panic and turn up as booked.”

A statement on the website of Italy’s civil aviation authority, Enac, said Alitalia’s licence to operate was also at risk if it failed to ensure that its flights took off.