Alitalia seeks bankruptcy measure

Negotiations with unions will be critical to saving the airline

Troubled Italian airline Alitalia has applied for bankruptcy protection as it tries to agree a deal to ensure its long-term survival.

The carrier has sought court protection from its creditors, effectively declaring itself insolvent.

An administrator will be appointed to handle the process, with flights continuing while the firm plans a radical overhaul of its operations.

Losing 2m euros (£1.6m) a day, Alitalia has survived on a 300m-euro state loan.

Plans are being drawn up to split the carrier into two and to sell a stake in a new entity to a foreign airline.

Split in two

Guaranteeing the airline’s future will depend on securing fresh investment and persuading its unions to accept large job cuts.

Both Air France KLM and Lufthansa have expressed interest in investing in any new entity which emerges from the current business.

No one can buy Alitalia in the state it’s in… the business is toast Roberto Colaninno

Earlier on Friday, Corrado Passera, head of the airline’s financial advisers Intesa Sanpaolo, confirmed that Alitalia’s board was drawing up a request to seek bankruptcy protection.

The move will give the firm breathing space to reach agreement on how the business can proceed.

The government adopted new measures on Thursday aimed at speeding up bankruptcy proceedings, widely interpreted as a signal that Alitalia was set for such a course of action.

Future plans for the carrier would see it divided in half, with its loss-making operations remaining under bankruptcy protection and potentially being liquidated.

Profitable short-haul routes would be separated into a new business, controlled by a consortium of Italian investors including budget airline Air One which would effectively be merged with Alitalia.

Italian media have speculated that the new firm will employ 7,000 fewer staff than Alitalia’s current 19,000 strong workforce and operate flights to about 50 fewer destinations.

Italian ownership

Prime Minister Silvio Berlusconi has made Alitalia’s continued ownership by Italian interests a precondition of any rescue deal.

However, experts have said the airline – of which the government owns 49% – can only survive in the future as part of some European alliance.

Silvio Berlusconi wants to keep the airline in Italian hands

Previous attempts to sell the business to a foreign airline have foundered over union concerns about job losses and unease over the severity of the airline’s financial problems.

The airline’s perilous position was put into perspective by Roberto Colaninno, appointed to take charge of the new entity that emerges from the restructuring.

“No one can buy Alitalia in the state it’s in,” he told La Repubblica newspaper.

“With all respect, I am not Merlin the magician. The business is toast. It doesn’t exist any more. There’s nothing left.”

Alitalia has been crippled in recent years by strategic indecision, poor industrial relations and soaring fuel costs.

Its shares were suspended earlier this summer while the firm has delayed the release of its 2007 accounts.

Europeans angry at Ryanair move

Ryanair says the move will benefit passengers in the long-term

Spain’s transport ministry has opened an investigation into Ryanair’s move to cancel thousands of bookings made via third party internet travel agents.

Ryanair says the sales, which represent about a thousand bookings a day, are illegal.

But the decision, in the height of the summer travel season, has been criticized by consumer groups.

Italy’s transport minister called it “another deplorable and incomprehensible move”.

Altero Matteoli said the decision not to honor Ryanair tickets booked by third party websites “damages its own clients,” in comments published in Italy’s daily newspaper La Repubblica.

The no-frills airline announced the move not to accept tickets bought anywhere other than on its website or via its telephone booking line last week.

‘Breaching copyright’

The news comes as the budget carrier posted a fall of 85% in net profits in the three months to the end of June.

A Ryanair spokesman said all tickets purchased from third parties after 11 August would be invalid and customers would be informed by email and refunded.

“We’re canceling these tickets because they are in breach of our terms and conditions. The third party is breaching our copyright,” Daniel De Carvalho.

The company said that up to 1,000 of the 200,000 bookings made each day on Ryanair flights were carried out via external websites, which it brands “screenscrapers”.

He said that customers were sometimes being charged a 200% surcharge on top of the value of the flight when not purchasing the ticket directly.

According to La Repubblica, a European Commission spokesperson said that if the company was found to be canceling tickets already sold it would intervene.

Reports suggest that tickets bought via sites such as V-tours, of Germany, Spain-based E-Dreams, Ireland’s Bravofly as well as some European versions of holiday booking website Opodo could be affected.

Italian consumer associations Adusbef and Federconsumatori have said the move “is in violation of the consumer code and passengers’ rights”.

E-Dreams has announced that it will take action against the firm for “irresponsibility and negligence”, Agence France Presse reports.

But Ryanair defended its choice.

“It’s a consumer-friendly decision,” Mr De Carvalho said. “We fight for our mission which is to deliver the lowest fares. We believe this measure, in the mid- to long-term, will benefit our passengers.”