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Alitalia goes into administration following staff vote

5 May 2017

Alitalia, Italy’s flagship airline, has gone into administration after filing an application on 2 May. 

Italian ministers approved the request at the same time as a €600m (£508m) bridging loan, which will keep all services running for the six-month administration period.

Once the 11th largest airline in Europe, Alitalia employs approximately 12,500 people in total. The company's many continental routes include 12 services per day from London airports to Italian destinations including Milan and Rome.

A representative from ABTA, the UK’s largest travel association, said: “All travellers who have flights booked will have their flights honoured over the next six months, the period of administration.

“As Italy’s national carrier the Italian authorities will try and find a way to keep the business going. They are looking for new funding and it is unusual for a national carrier to go out of business."

Why has Alitalia gone into administration?

Alitalia’s decade-long financial difficulties have been well documented. The airline has been supported by over €7bn (£5.9bn) worth of payments from the Italian state.

Abu Dhabi airline Etihad own a 49% stake in Alitalia, and were willing to offer up to €2bn in order to help make the carrier solvent once again, providing certain conditions were met.
The most significant proviso was that the company would have to streamline operations with the majority approval of stakeholders. However, when this plan was put to Alitalia employees last month, they voted against the job and salary cuts required.
This rejection left proceedings at something of an impasse, and has ultimately resulted in the company entering administration.

What has been the reaction to this news?

James Hogan, chief executive of Etihad, commented: "We have done all we could to support Alitalia as a minority shareholder.
“But, it is clear this business requires fundamental and far-reaching restructuring to survive and grow in future. Without the support of all stakeholders for that restructuring, we are not prepared to continue to invest."
The Italian government was similarly reluctant to offer further support to the struggling airline. The country’s industry minister openly opposed renationalisation, or releasing further funds, when questioned last month.
This seems to be broadly in line with public opinion. People have taken to social media en masse to reject the idea of further funds being issued, while an opinion poll found that 77% of Italians believed Alitalia should be left to fail.
As a national carrier, it's rare for companies to come under quite so much public scrutiny when considering administration.

What will the administrators do?

Despite this ominous outlook, administrators are now busy exploring the possibility of turning Alitalia around. A six-month administration period is in effect, in which time administrators will be exploring all possible options.
The government has called on administrators to minimise the amount of additional money paid to the company by the taxpayer, and has asked them to secure prospective buyers in the shortest possible time frame.
Alitalia’s travails provide a prime example of how – even when a situation appears beyond salvage – administrators can continue working to turn businesses around. Administration could even be the cleansing exercise you need to make a fresh start.
If you are concerned about your business going into administration, call on expert advice from Company Rescue.

Categories: Administration, What is administration