Troubled Alitalia agrees pounds 1.3bn rescue

Alitalia yesterday announced agreement had been reached on a mould-breaking rescue plan that paves the way for a cost-cutting programme and up to pounds 1.3bn in fresh capital to save the loss-making national airline.

The deal was immediately attacked by British Airways, whose spokeswoman said: ``Our position is well documented. We remain opposed to state aid but the Alitalia deal is not yet signed and sealed.''

Under the deal hammered out with the unions, at least 20 per cent of the group's shares would be reserved for staff after its recapitalisation, while three seats on the board would be set aside for share-holding employees and one for a union representative.

The company said the number of shares assigned to each group of employees under the deal would be determined by their "contribution, in terms of reduction of labour costs".

Agreement with the unions had been seen as vital as two previous rescue plans in as many years have sunk without trace after running into opposition from workers.

The latest rescue plan was announced last month by Alitalia's new managing director, Domenico Cempella, and envisages staff cuts, reduced overheads, and a pounds 1.3bn capital increase. Its majority shareholder, the state holding company IRI, will pump half that cash into the airline, with the rest coming from financial markets.

This month IRI said it had put on hold a decision to inject funds until unions agree to the plan. Alitalia has remained confident its shareholders would approve its capital increase. Alitalia has said restructuring would involve dividing the airline in two, with one unit focusing on long-haul flights and the other medium- and short-haul operations.