Alitalia files for bankruptcy, Etihad cuts off funding

Alitalia, the Italian flag carrier that turned a profit last time in the late 1990’s, has yesterday filed for bankruptcy proceedings after unions voted down a reorganization plan that would have cut wages and recapitalized the airline.

The administration has 180 days to come up with a plan to “rescue” the airline by selling it, somehow make it profitable gain or liquidate it if there are no other options. This 180 day period can be extended by 90 days. The Italian government has provided bridge loan of €600 million to keep the airline flying for now. Sources have said that the company is losing approximately €1m a day.

It’s unclear whether this time there will be anyone willing to take on the struggling company. In 2008, Alitalia went bankrupt after a proposed sale to Air France-KLM fell through. The airline reorganized, but just six years later it was in trouble again, and Etihad Airways agreed to take a 49 percent stake in the airline.

The Abu Dhabi-based carrier couldn’t buy the airline outright (even if it wanted to) due to European Union restrictions, so, as in the past, there’s speculation about a merger with a variety of other European lines. The latest rumors center on Lufthansa, which already owns a collection of smaller European lines like Austrian and Swiss; the German carrier has declined to comment.

The final setback came just last week when the carrier’s 12,500 employees voted down a multi-billion recapitalization plan that would have required cuts in workers’ compensation.

James Hogan, the CEO of Etihad Airways, which bought into Alitalia during the latest restructuring in 2014 and is now its largest single investor with a 49 percent stake, said in a statement the Italian airline required “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,” he said, adding Etihad would keep working with Alitalia as a commercial partner.