Sun, Aug 31, 2008 - Page 11 News List

Alitalia seeks bankruptcy protection

GOING DOWN FASTOn Thursday, Italy approved key changes to bankruptcy-protection law, tailoring it to meet the financially strapped national carrier’s needs

AP , ROME

Alitalia said on Friday it had filed for bankruptcy protection, taking the first step in a plan to restructure and downsize Italy’s failing national carrier.

The company said in a statement that its board had asked the government to appoint an administrator and had declared insolvency to a Rome court.

Alitalia has been losing some 2 million euros (US$3 million) a day — hurt by labor unrest, competition from budget airlines and high fuel prices. Its shares have been suspended from trading since June.

The airline said its net debt at the end of last month amounted to 1.172 billion euros, an increase of 57 million euros from the June.

The figure does not include a 300 million euro loan that the government granted in April to keep the cash-strapped carrier flying.

Following Alitalia’s announcement, the government named Augusto Fantozzi, a tax law expert and former finance minister, as the company’s administrator.

Fantozzi served as economy minister in 1995 in a government headed by the-Italian prime minister Lamberto Dini and then as minister of foreign trade in then-Italian prime minister Romano Prodi’s Cabinet a year later.

The government and others involved have been secretive about the negotiations to save the state-run carrier, but the plan reportedly envisages the breakup of Alitalia into two parts.

The profitable assets will be taken over by a group of Italian investors ready to inject 1 billion euros into the airline. The bad assets will be spun-off into a separate company for liquidation.

The plan is the latest attempt by the government to sell its 49.9 percent stake in the loss-making airline following a failed bid by Air France-KLM earlier this year.

On Thursday, Italian Prime Minister Silvio Berlusconi’s government approved key changes to the country’s bankruptcy-protection law, tailoring it to Alitalia’s immediate needs.

The decree passed at a Cabinet meeting allows for the breakup of the company and gives the administrator the power to sell off assets through private or exclusive negotiations.

It also makes exceptions to Italy’s antitrust regulations — an indirect confirmation of reports saying the new company will be merged with Air One, Italy’s second largest airline.

A group of 16 Italian businessmen has stepped up to invest in the new company, headed by Roberto Colaninno, the chairman of motorcycle maker Piaggio. He is expected to become chairman, while Rocco Sabelli, a veteran executive who has often worked with Colaninno, is the designated chief executive.

Air One’s head, Carlo Toto, is also among the investors.

The merger between the two biggest Italian airlines has raised antitrust concerns, especially because the new group will have a virtual monopoly on the highly traveled Rome-Milan route.

The plan could also raise eyebrows at the EU, which is already investigating whether the government’s loan in April broke EU rules that limit assistance for companies.

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