ALITALIA ON THE VERGE OF BANKRUPTCY

October 31, 2008

A group of Italian investors planning to buy Italian airline Alitalia will not meet a Friday deadline to make an offer after failing to reach a deal with the carrier’s pilot and flight staff unions, a source close to the talks said.

The CAI group’s decision not to present a binding offer marks the second time it has pulled back from making a bid, threatening the future of the cash-strapped carrier, due to union resistance.

With no other bidders in the fray and Alitalia’s cash reserves expected to last only another month, the CAI’s decision to pull back from making an offer at the last minute could also be a bargaining tactic to get the remaining unions on board with its plans.

The unions do support CAI’s takeover of Alitalia in principle, but talks over the detailed terms of new work contracts collapsed this week amid mutual accusations of inflexibility. CAI has stressed that union backing is a pre-requisite for making a binding offer.

Talks mediated by a senior aide to Prime Minister Silvio Berlusconi on Friday managed to get only four out of nine unions on board with a compromise on the new work contracts.

Alitalia’s three biggest unions – Cisl, Cgil and Uil — and the Ugl union, signed up to a compromise under which a senior aide would intervene to sort out remaining problems between the two sides, a union source said.

But the remaining five unions — mainly representing flight assistants and pilots — refused the deal, they said.

Berlusconi’s aide Gianni Letta warned unions that the only alternative for Alitalia was liquidation — a familiar threat that nearly came to pass last month when unions opposed CAI’s initial deal.

“We’re close to the abyss, there’s no more room for talks. The alternative is bankruptcy. At midnight, Alitalia will no longer exist,” Letta said at the meeting, according to a union source who was present.

Fearing further delays, Alitalia’s bankruptcy commissioner has warned the airline will be forced to seek new funds if a deal is not wrapped up by mid-November.

Last-minute talks, delays and missed deadlines litter Alitalia’s nearly two-year takeover saga.

Keeping Alitalia alive was one of the main election planks on which Berlusconi ran for office in April, and his government has since rewritten bankruptcy law to pave the way for a bailout by the CAI consortium.

(Reuters)



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