Berlusconi's Alitalia Rescue Plan Faces Hurdles In EU Alitalia is on the verge of liquidation in a few weeks. Now the only hope for Italy's flagship air carrier is a controversial rescue plan proposed by Prime Minister Silvio Berlusconi. But the plan would lay off thousands and could face obstacles in the European Union.
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Berlusconi's Alitalia Rescue Plan Faces Hurdles In EU

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Berlusconi's Alitalia Rescue Plan Faces Hurdles In EU

Berlusconi's Alitalia Rescue Plan Faces Hurdles In EU

Berlusconi's Alitalia Rescue Plan Faces Hurdles In EU

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Alitalia is on the verge of liquidation in a few weeks. Now the only hope for Italy's flagship air carrier is a controversial rescue plan proposed by Prime Minister Silvio Berlusconi. But the plan would lay off thousands and could face obstacles in the European Union.

RENEE MONTAGNE, host:

A lot of airlines are in trouble, but the Italian airline Alitalia is in worse trouble than most. Alitalia became famous for ferrying popes and glamorous Italian film stars around the world. Now it faces liquidation within weeks if a controversial rescue plan is not put into effect. The government of Silvio Berlusconi has changed the bankruptcy laws and suspended antitrust regulations to try to save the airline. NPR's Sylvia Poggioli has this report from Rome.

SYLVIA POGGIOLI: The rescue plan has been dubbed Operation Phoenix, suggesting Alitalia could re-emerge from its own ashes like the mythical bird. The Berlusconi government has developed a plan in which a newly formed company would take over Alitalia's healthy and profitable assets and re-launch the carrier, while its debts and loss-making operations would be placed in a state-owned company that would be liquidated. Banker Corrado Passera is the architect of Operation Phoenix.

Mr. CORRADO PASSERA (CEO, Intesa Sanpaolo) (Though Translator): This is a serious, solid plan with long-term commitments, and it's capable of restructuring and re-launching Alitalia. Of course, we will need to reach an agreement with the unions.

POGGIOLI: One of the plan's most controversial aspects is the layoff of an estimated 7,000 of the 20,000-strong Alitalia workforce. It was Italy's notoriously hard-bargaining unions that in April scuppered a plan to sell Alitalia to Air France-KLM in which only 2,100 workers would have been laid off. Prime Minister Berlusconi is also blamed for the failure of that takeover bid when he made it an election issue, campaigning on the need to keep Alitalia in Italian hands. The carrier has been unprofitable for seven years, now losing from $1.5 to nearly $3 million a day. The company has been surviving on a state loan of some $470 million made in late April after the collapse of the Air France bid. Italian Labor Minister Maurizio Sacconi has told unions that Alitalia's liquidity is crumbling.

Senator MAURIZIO SACCONI (Minister for Labor, Italy) (Through Translator): By mid-September, the situation at Alitalia could reach a critical point, making it impossible for the company to survive.

POGGIOLI: If the unions don't sign onto the plans, Saconni said, the entire company will have to be liquidated. The Italian state has a 49.9 percent share of Alitalia. Seventeen Italian investors, including the clothing group Benetton, formed a consortium that plans to pump $1.5 billion into the new, streamlined company. The government also suspended antitrust regulations so that the new Alitalia can merge with its smaller rival, Air One. The new company would have a domestic market share of 60 percent. But the center-left opposition loudly criticizes the plan, saying the Italian state and consumers will foot the bill, which includes seven years of layoff payments for 7,000 workers. Anna Finocchiaro is the senate leader of the Democratic Party.

Senator ANNA FINOCCHIARO (Senate Leader, Italian Democratic Party) (Through Translator): We want to safeguard the future of many Alitalia workers and prevent the creation of a monopoly. Berlusconi is marginalizing the unions. This is not how a modern democracy works.

POGGIOLI: The Alitalia rescue plan could also face obstacles in Brussels. European Union Monetary Affairs Commissioner Joaquin Almuna has said the solution has to conform to EU rules and be good for the company and employees as well. And the German newspaper Frankfurter Allgemeine, which is very influential in financial circles, has severely criticized the Alitalia plan. The paper has written that it flaunts all free-market rules, and accused Berlusconi of promoting a state-run economy. Customers, the paper charges, will end up with a more expensive and less efficient air carrier. Sylvia Poggioli, NPR News, Rome.

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