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UPDATE 1-Alitalia's options dwindle with no rescue bid, state aid on offer
April 27, 2017 / 3:54 PM / 7 months ago

UPDATE 1-Alitalia's options dwindle with no rescue bid, state aid on offer

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MILAN/ROME, April 27 (Reuters) - Alitalia moved closer to collapse on Thursday when major shareholder Intesa Sanpaolo said it had no plans to save the airline, foreign rivals denied being interested in a possible bid and the government ruled out a rescue for its problem child.

Alitalia workers on Monday rejected a restructuring plan that envisaged cuts to jobs and salaries, making it impossible for the airline to secure funds to keep its aircraft flying.

This has put pressure on the government to find a way to save the historic flag carrier and its 12,500 staff, with sources close to the situation saying Alitalia’s cash is set to run out within 2-3 weeks.

The loss-making airline is now preparing to go into special administration, whereby Rome will appoint a commissioner who will assess whether it can be overhauled - either as a standalone company or through a partial or total sale - or whether it should be wound up.

Rome is seeking European Union approval to give Alitalia a bridge loan of up to 400 million euros ($434 million) to keep it afloat while a buyer is sought, but Economy Minister Pier Carlo Padoan ruled out taking part in a recapitalisation.

“The government is not willing to participate directly or indirectly in any capital increase,” Padoan told parliament.

Despite having rarely turned an annual profit in its 70-year history, Alitalia’s survival is considered a matter of national pride and with elections looming next year analysts say the centre-left government can ill afford to let it fail.

“The government is not strong enough to let Alitalia go under, we are on the brink of an election and there are all the jobs on the line,” Andrea Giuricin, a transport analyst at Milan’s Bicocca University, said.

Former Prime Minister Matteo Renzi, who is running to lead the ruling Democratic Party, said if he wins Sunday’s primary vote he will come up with a rescue plan for Alitalia by mid-May, adding no public money should be spent but giving no details.

Options are dwindling fast, with private players both inside and outside Italy distancing themselves from any last-ditch attempt to save the airline.

Germany’s Lufthansa, often cited in the Italian press as a potential bidder, and budget rival Norwegian Air on Thursday denied any interest.

Major Italian retail bank Intesa Sanpaolo - both a shareholder and a creditor of Alitalia - denied reports that it was working on a plan B.

Successive Italian governments have spent an estimated 7 billion euros to keep Alitalia’s planes flying, rarely requiring strong industrial strategies in return.

The government’s latest rescue in 2014, brought in the state postal service as an investor to boost Alitalia’s coffers before it negotiated a deal with Etihad Airways, now its largest single investor with a 49 percent stake.

Etihad had aimed to make Alitalia profitable by 2017. But the turnaround flopped due to competition from low-cost rivals and high-speed trains, while attacks in Europe dented tourism.

$1 = 0.9212 euros Reporting by Gianni Montani in Turin, Alberto Sisto and Steve Scherer in Rome and Agnieszka Flak in Milan. Editing by Jane Merriman

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