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Alitalia Heads Toward Bankruptcy After Workers Reject Government Plan

by Daniel McCarthy  April 27, 2017

Troubled Italian flag carrier Alitalia is headed toward bankruptcy for the second time in a decade after its workers voted to reject a $2.2 billion recapitalization plan this week.  

The plan, which was negotiated by the Italian government, would have cut some of the 12,000 jobs, but would have given the airline the funds to stay afloat while seeking a buyer. Now the airline, which cut routes from several European cities including Moscow, Prague, Berlin and Catania last year, faces an uncertain future.  

Alitalia has dealt with more than a decade of financial problems. After declaring bankruptcy in 2008 it was bought by Compagnia Aerea Italiana (CAI), who merged it with another bankrupt Italian carrier, Air One, and continued operations.  

Another major financial crisis was averted in 2014. On the verge of failing, Alitalia was saved when the Italian government helped broker a deal for Etihad to take a 49% stake. The carrier said at the time that it had a strategy to become profitable by 2017, but that has proven too ambitious. Alitalia has lost share in its home market—going from a 23% share in 2008 to an 18% share in 2015—and lost more than 8 million passengers in the past decade.  

The Italian government has stressed that it has no plans to nationalize the airline. Barring an unseen outside influence, that leaves bankruptcy as the only option.   

Alitalia chairman Luca Cordero Di Montezemolo said the carrier will now look to name an administrator to begin the process of selling off many of the airline’s assets. If the carrier survives, it likely will be a lot smaller than it is today.

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