La Dolce Vita is com­ing to an end for Al­i­talia staff

The National - News - Business - - Analysis - Si­mone Filip­petti Si­mone Filip­petti is a fi­nance & econ­omy reporter at Ital­ian daily news­pa­per Il Sole 24 Ore

Aweird story has been told for years among Al­i­talia’s em­ploy­ees. In the 1980s, women cabin crew who were preg­nant didn’t tell the com­pany and in­stead would board the Tokyo flight (the fur­thest des­ti­na­tion for Al­i­talia) and then sud­denly fall ill. There they would go to the ER where doc­tors would dis­cover the preg­nancy and not al­low them to fly back to Italy. So flight as­sis­tants would stay for months in Tokyo, un­til they gave birth, fully paid (on a dis­tance ba­sis) by the Al­i­talia health in­sur­ance plan.

When they came back, they had earned so much money from ex­penses that some of them are be­lieved to have bought a house with the funds. Whether the story is true or not, it still ex­plains a lot about Al­i­talia gov­er­nance and man­age­ment over the decades.

Back in the 1960s, Al­i­talia was the third air­line in Europe and ranked 7th world­wide. Big num­bers. To­day, Al­i­talia is the most trou­bled air­line in Europe. Whereas the avi­a­tion in­dus­try is ex­pe­ri­enc­ing a boom, the Ital­ian com­pany is strug­gling with losses of more than €1 mil­lion (Dh3.91m) per day. Since the 1970s the com­pany has cost Ital­ian tax­pay­ers €7.4 bil­lion in pub­lic fi­nanc­ing.

Why? Al­i­talia has about 12,500 em­ploy­ees for only 120 planes and 30 mil­lion pas­sen­gers per year. Low­cost com­peti­tor Ryanair has 11,000 work­ers for 300 planes and 100 mil­lion pas­sen­gers. The ground-to-cabin crew ra­tio is to­tally mis­bal­anced: Al­i­talia has 10 ground as­sis­tants for ev­ery 1 flight as­sis­tant. Ryanair has 1 ground as­sis­tant for ev­ery 2.5 flight as­sis­tants.

In 2008, after years of losses and bad man­age­ment as a state-owned com­pany, Al­i­talia was al­most broke: it was saved by the Ital­ian gov­ern­ment. Sil­vio Ber­lus­coni, when he was the prime min­is­ter, wanted Al­i­talia to re­main “Ital­ian”. So, claim­ing a pa­tri­otic spirit, he cre­ated a bad com­pany, where he put all the li­a­bil­i­ties. And then cre­ated a new com­pany, the New Al­i­talia.

Tax­pay­ers took on the costs of the badco through a sur­charge on flight tick­ets. On the other hand, a group of Ital­ian en­trepreneurs, the so called “Cap­i­tani Cor­ag­giosi” (brave cap­tains), got the new Al­i­talia, clean of debts. After six years even the Cap­i­tani waved a white flag: Al­i­talia was again in trou­ble. This time Eti­had Air­ways ap­peared on the scene and bought a 49 per cent stake in the com­pany in 2014. It was the new “white knight” to save Al­i­talia.

After three years, the Abu Dhabi-based com­pany risks los­ing all it has done after the air­line’s em­ploy­ees re­fused to ap­prove the res­cue plan.

Go­ing into yes­ter­day’s meet­ing of share­hold­ers to de­cide the air­line’s fu­ture, it ap­peared that Al­i­talia would have no other choice than fil­ing for bank­ruptcy: un­der the Ital­ian law this would bring in gov­ern­ment-ap­pointed chief ex­ec­u­tives (prob­a­bly three) to run the com­pany for six months, try­ing to make a turn­around work or pro­ceed to as­sets liq­ui­da­tion. At the same time, share­hold­ers’ eq­uity value would be erased to zero.

Blame Al­i­talia em­ploy­ees for this fright­en­ing sce­nario. Pilots and cabin crew re­fused a plan based on lay­offs – 980 em­ploy­ees would leave the com­pany but re­ceive a monthly salary paid by the Ital­ian Gov­ern­ment – an 8 per cent cut in wages and more work­ing days per year. This plan needed to be ap­proved by the em­ploy­ees, as re­quested by the worker unions. Paolo Gen­tiloni, the Ital­ian prime min­is­ter, made a big push, pub­licly urg­ing Al­i­talia pilots to vote “yes”. The en­dorse­ment was use­less and prob­a­bly got the op­po­site re­sult. The ma­jor­ity voted “no”. On the sur­face it seems that Al­i­talia work­ers have all gone nuts. Why did they re­ject a plan that in­volved a hard sac­ri­fice but a chance of re­cov­er­ing to in­stead face the risk of a to­tal com­pany dis­rup­tion and liq­ui­da­tion, and ul­ti­mately all lose their jobs any­way?

This is the re­sult of pop­ulism; a long wave that has hit Europe and the United States in the past year. Al­i­talia work­ers, over­staffed but un­der­pro­duc­tive, felt an­gry about the “sys­tem”, the politi­cians, and the man­agers, who earn mil­lion­aire com­pen­sa­tion with­out sav­ing, so far, the com­pany.

Al­i­talia’s story is the same as the Ital­ian ref­er­en­dum last De­cem­ber, which ousted Mat­teo Renzi as prime min­is­ter; the same as Don­ald Trump’s elec­tion win; the same as the sur­pris­ing Brexit vote. In west­ern coun­tries, top man­agers and politi­cians are be­com­ing more and more hated.

Com­mon peo­ple think their lead­ers are not solv­ing their prob­lems: the un­em­ploy­ment rate is at the high­est his­tor­i­cal lev­els among young peo­ple; wages are shrink­ing; the mid­dle class feels it is get­ting poor. So all this un­hap­pi­ness ex­plodes when some­one is called to a poll, what­ever it is: they vote with the belly, not with the brain. They want to give a protest sig­nal to gov­ern­ments. And who cares if the de­ci­sion could, as the Al­i­talia one surely will, af­fect them heav­ily in the mid term.

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