August 5, 2008 / 4:14 PM / 11 years ago

UPDATE 1-Italy delays Alitalia move to avoid strikes-sources

(Adds more details from sources)

By Giselda Vagnoni

ROME, Aug 5 (Reuters) - The Italian government has decided to put off any decisions on Alitalia’s fate until after the August recess to avoid strikes by unions unhappy with eventual plans to salvage the airline, sources close to the matter said.

Alitalia AZPIa.MI said in a statement on Tuesday it has postponed a board meeting due on Friday to approve its first-half results until Aug. 29, without giving a reason.

A company source said the airline is still waiting for the Italian government to decide whether it ought to file for bankruptcy — as a long-awaited rescue plan by adviser Intesa Sanpaolo is expected to suggest as a first step.

“The government’s determinations on the basis for continuing business are being awaited,” an Alitalia official said.

The Italian government, which owns 49.9 percent of the carrier, denied there were plans to put Alitalia under special administration — similar to a U.S. bankruptcy filing — after reports that there could be 5,000 job cuts sparked an uproar.

But Italian media reports say Intesa found it impossible to find new investors for the airline in its present form, leaving the government with few options other than bankruptcy.

Intesa’s plan involves splitting off the airline’s healthy parts for new investors to inject capital into, after a special administration filing for the whole company, reports say.

Italy’s Parliamentary Affairs Minister Elio Vito said on Tuesday that the Intesa plan would be ready in the coming weeks.

One source close to the matter said the government had decided to put off discussions on Alitalia’s fate until after the August recess to avoid angering the unions over the holiday period.

“The government is taking its time to avoid the risk of huge repercussions for Italian and foreign travellers,” the source said.

Alitalia is expected to report that it has sunk even deeper into the red at the end of the month, as high oil prices and a drop in bookings tear a hole through its already shaky finances.

Citigroup analysts predict Alitalia will post a 20 percent drop in revenue, driven by cutbacks in its Milan operation, and a 23 percent fall in traffic. They also expect it to run out of cash without a fresh injection of funds. (Writing by Deepa Babington; Editing by Greg Mahlich)

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