Italy loans Alitalia $650 M as it looks for a new buyer

MILAN (AP) – Struggling Italian carrier Alitalia entered its second period of bankruptcy protection in a decade on Tuesday with the government approving a 600 million-euro ($650 million) bridge loan to keep the airline operating as it seeks a new buyer.

The move came after the Alitalia board acknowledged the failure of a government-brokered relaunch plan, which workers overwhelmingly rejected despite softened job and salary cuts, out of concern it lacked a realistic strategy to revive revenue.

The plan’s failure blocked a planned 2 billion-euro ($2.2 billion) investment from both managing shareholder Etihad Airways, with a 49-percent share, and a consortium of Italian investors that controls a 51-percent stake.

Economic Development Minister Carlo Calenda said the goal in the short term is to seek buyers while protecting service, routes and workers and “spending as little government money as possible.”

The Italian government named three administrators – Luigi Gubitosi, Enrico Laghi and Stefan Paleari – to see Alitalia through a six-month period of reorganization. Alitalia has lost competitiveness as the European aviation market has been liberalized, suffering in particular under competition from low-cost carriers. Its failure has previously been staved off by government interventions.

Analysts, however, say it may be difficult to find another suitor, making the prospect of liquidation more likely than in past crises as the government may lack the political will to ensure the carrier’s survival as a standalone entity.

“There is an air of inevitable disaster,” said airline analyst Gregory Alegi, who teaches at Rome’s LUISS University. “We could see something like Austria Air or Swissair, which ended up in the Lufthansa world but much slimmer and trimmer.”

Alitalia has continued to emphasize that flights are operating on schedule. And Alegi said the airline was unlikely to suffer a loss of bookings over the summer, as much travel already is scheduled. However, the company may run into trouble booking longer-term travel and group operators, which could cost it cash.

“Would you buy a ticket now for an operator that may not exist in six months?” Alegi asked.

Alitalia filed for bankruptcy protection in 2008 when it was still state-owned, but avoided liquidation when then-Premier Silvio Berlusconi organized a group of Italian investors to step in during a privatization process. Etihad took a 49-percent stake in 2014.

Etihad Aviation Group CEO James Hogan said in a statement that Alitalia needs “fundamental and far-reaching restructuring to survive” and made clear the Abu Dhabi-based airline is not prepared to continue pumping money into the Italian company.