Financial Times

By Tony Barber in Rome
Published: May 7 2004 18.51 | Last Updated: May 7 2004 18.51

Italian industrialists and politicians warned on Friday that Alitalia was still in danger of collapse after the government swept away the airline's old management and won a promise from trade unions not to hold strikes.

"For too many years, our country has put off the necessary remedies and restructuring measures for Alitalia," said Antonio D'Amato, outgoing president of Confindustria, Italy's employers' association.

"There has to be a very serious and rigorous restructuring plan because this is the only way to avoid bankruptcy."

"It's a good agreement, it's a starting point," said Rocco Buttiglione, minister for European affairs, referring to Thursday's deal between the centre-right government and the unions. "But in the medium term it is not enough."

Their comments served as a reminder that Giancarlo Cimoli, the newly appointed chairman and chief executive of Alitalia, will face choices as difficult as those that confronted his predecessors.

Mr Cimoli, an engineer with long experience of state industry, is expected to start putting together a rescue plan next week. Its full dimensions might not become clear until after politically sensitive elections in Italy on June 12-13.

People in the airline industry said he was likely to use his connections with some of Italy's leading banks to seek a recapitalisation of Alitalia, possibly to the tune of €800m ($968m) to €1bn.

Alitalia had net financial debt, including bonds, of €1.44bn at the end of 2003. It has lost more than €1.5m a day since January 1 and it estimated its cash reserves this week at €200m.

The banks are the most likely candidates to help out Alitalia, which is 62 per cent owned by the state. Giulio Tremonti, finance minister, vowed on Thursday he would not add to the €2.53bn in public funds the airline has burned up since 1991.

Mr Tremonti has strengthened the finance ministry's influence over Alitalia's future strategy by ensuring that Roberto Ulissi, head of the ministry's legal affairs section, will have a seat on the airline's new board.

Corrado Passera, chief executive of Banca Intesa, Italy's largest bank, has already said some banks will be ready to help out if Mr Cimoli comes up with a credible restructuring plan.

Pietro Lunardi, transport minister, said one of Mr Cimoli's options was to pursue a plan, aired by the government this week, to transform Alitalia into a holding company that would operate two units - one handling flights, and the second handling other services.

The hardest question is job cuts. Mr Cimoli's predecessors proposed several thousand job losses but government and union opposition ensured that the only jobs that disappeared were theirs.