As negotiations with the EU stall, Alitalia is quickly running out of cash. The airline cannot receive funds from the Italian government until it gets the EU’s nod, leaving the airline cash-strapped. Unless a breakthrough occurs soon, Alitalia might be running out of luck and time to keep flying.
According to a report from Bloomberg, negotiations between the Italian government and the EU’s Antitrust Chief Margrethe Vestager have failed to yield results. The two sides disagree on whether the newly-funded airline should receive Alitalia’s brand, assets, and key slots or purchase them at the market rate.
According to the current plan, Alitalia will come under the ownership of ITA, or Italia Trasporto Aereo, and will be owned by the government. The new leadership plans to overhaul the airline completely and return it to profitability. However, the EU has raised doubts about ITA’s plans for Alitalia and is not convinced it can be overhauled.
The European Union is demanding that ITA make a clean break from Alitalia. This would mean not using the name or any assets from the bankrupt airline and starting afresh. However, Italy does not want to give up key slots at airports like Milan and buy back Alitalia assets like aircraft and hire staff again.
Time running out
Caught between the crossfire is Alitalia itself. The airline has been bankrupt since 2017 and only survives due to government loans. However, the latest round of €3bn ($3.53bn) funding must be approved by the EU to avoid being labeled “illegal state aid”. Since 2008, Alitalia has cost taxpayers a huge €5.4bn ($6.3bn) to keep afloat.
Without this boost of funding, Alitalia is running the risk of running out of cash. The airline only paid its employees 50% of their March salaries due to the financial situation and could run out of funds soon. If that were to happen, the airline would be forced to ground all flights and operations until a solution is found.
Italy could also be holding back from scrapping Alitalia due to the chances of missing the lucrative summer season. Starting a new airline, including new staff and planes, by July would be a herculean task. However, without the EU’s nod, there is little the government can do to help Alitalia right now.
Under a turnaround plan put forward, the new Alitalia will have 4,500 employees and operate only 45 aircraft. This would mean reducing the workforce and fleet by half in the coming months. Other reports suggest the airline might have an even smaller workforce in a bid to keep costs low. However, until the airline receives permission to continue with its turnaround, it is running out of time and luck.
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