A final attempt to save Alitalia

VIEW FROM ROME

According to Alitalia's former managing director, Roberto Schisano, Italy's national flagship service has barely three months to live. "If a drastic cure does not arrive within 100 days," he told a magazine interviewer last week, "our airlines will disappear from the skies."

The figures make depressing reading. Alitalia has debts of around 3.5 trillion lire (pounds 1.5bn), but only 500 or 600 billion lire in liquid assets. The airline has not made a profit in eight years and is currently losing around one billion lire a day. For the last few months it has been selling off valuable interests, such as its majority stake in the Rome airport authority, but the extra cash seems to disappear almost as soon as it arrives.

The arithmetic is as simple as it is frightening: unless the company can rapidly attract substantial new capital, its assets will have dried up by the end of the year at the latest. It wouldn't be the first national carrier in the world to go bust, but its disappearance would be a severe blow to Italy's fragile sense of national pride - not to mention putting more than 18,000 people out of work.

"We're not a country of idiots. Surely we are capable of saving Alitalia," the Italian prime minister, Lamberto Dini, exclaimed recently. Capable perhaps, but willing is another matter. The state holding company IRI, which has a 90 per cent stake in Alitalia, has promised a 1.5 trillion lire cash injection. But there are two conditions attached.

The first is a settlement of a long industrial dispute with the carrier's pilots, who have staged strike after damaging strike in pursuit of a satisfactory deal on pay and conditions. And the second, stipulated not by IRI but by the European Commission, which must give its consent to any recapitalisation, is a credible business plan to bring the company's runaway finances under control.

Unfortunately, neither condition looks anywhere near being fulfilled. Both have been scuppered by an near-total breakdown in communication between management and the unions - a clash which says as much about post-war Italian political and industrial culture as it does about the problems of yet another ailing European airline.

For much of the period Alitalia was, like all large state-controlled concerns in Italy, a plaything of the powerful, who were far more concerned about carving up jobs and handing out favours than about operating a viable public service. The unions connived with this, obtaining better conditions for Alitalia workers than for any other comparable airline.

In the late 1980s, the money began to dry up, but the freeloading did not. In 1992, Alitalia's costs were 5.9 per cent higher than the average European airline, and 24.6 per cent higher than British Airways'. In the four years since then, the cost of one pilot hour has soared nearly 80 per cent.

After record losses in 1993, IRI finally called in a new management team headed by Renato Riverso, a senior executive with IBM, and Mr Schisano, who was working with Texas Instruments. At much the same time that media tycoon Silvio Berlusconi was promising Italy a free-market revolution, the two men vowed they would inject a US management style into the Alitalia bureaucracy. Together they formulated a three-year plan to cut operating costs by 12 per cent and personnel costs by 20 per cent.

But in the end they had scarcely more luck than Mr Berlusconi, who was hounded out of office after seven months. Mr Schisano, in particular, did not count on the entrenched power of the unions, who quickly identified him as public enemy number one - "the Texan", as they disparagingly called him. Last June, 340 pilots all called in sick with colds at the same time; in response, Mr Schisano had them ordered back to work on pain of criminal charges and sent the tax police to investigate their private financial affairs. Moreover, he began the highly unpopular policy of sub-contracting piloting and cabin crew jobs to an Australian company whose staff were 35 per cent cheaper.

But Mr Schisano was not simply tough, he was devious too. While castigating the pilots in public, he secretly negotiated a 28 billion lire pay rise for them. When news of the deal broke last autumn, Mr Riverso and the management of IRI were so furious that he was summarily fired.

Mr Riverso resumed talks with the pilots using a more conciliatory line, but he got no further than his unhappy erstwhile colleague. Earlier this month he resigned, accusing the unions of intransigence and blaming an "inert, mute and passive" IRI for lack of nerve.

Alitalia is now in the hands of a new general manager, Domenico Cempella, the former head of the Rome airport authority. But the restructuring strategy is in tatters and the long contractual negotiations are back at square one.

Andrew Gumbel

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones