MILAN (Reuters) - Alitalia finally secured the 300 million euros ($412 million) it needs to keep flying over Christmas, a source said on Tuesday, concluding a drawn-out capital raising that showed how much work the airline has to convince investors it can survive.
Italy’s national carrier, having pocketed cash that analysts estimate will last it six months, now goes straight to its next challenge: A meeting with unions where sources said it will try to persuade them to sign up to thousands of job cuts.
The cash call was part of a bigger government-engineered rescue to keep Alitalia going while it searches for a new partner willing to invest in revamping its fleet and making it profitable in the longer term. The scale of that task was illustrated by the airline’s difficulty in persuading shareholders to sign up for fresh investment - many aired doubts over its proposed business plan or wanted to see tougher restructuring of the airline’s debt.
The source said Italy’s state-owned postal service, which had been lined up to commit up to 75 million euros for any unsubscribed shares, had to participate in the cash call in the end, although to what extent was not yet known.
“Including subscriptions by existing shareholders, new investors and the investment by the postal service, the 300 million euro target has been reached,” the source said.
An Alitalia spokeswoman said the company would comment on the outcome of the capital increase in due course. The deadline to take up any unsubscribed rights in the cash call expires later on Tuesday.
At the same time, Alitalia’s management is due to meet trade unions to present details of a revised industrial plan, which sources said could include up to 2,600 job cuts out of the airline’s total workforce of 14,000 people.
Unions say they are gearing up for a battle should layoffs at the airline be announced. Any tough restructuring of the airline to suit a foreign investor would also weigh on the already fragile coalition government of Enrico Letta.
“UNDER THE CARPET”
The capital raising, later extended to new investors including Italian businessman Antonio Percassi, will likely allow Alitalia to keep flying throughout the key Christmas holiday season. But with daily losses of around 700,000 euros and net debt of more than 800 million euros, the company could risk having to ground its fleet again within six months, analysts said, unless a strong partner is found.
“With this fresh capital, Alitalia’s problems have been swept under the carpet for a few months but by summer next year they will reappear,” a Milan-based analyst said.
“Alitalia needs much more than 300 million euros to revamp its fleet so it can finally start making revenues. Three to four billion euros is more like it.”
Top shareholder Air France-KLM (AIRF.PA), which has a 25 percent stake in Alitalia and had been seen as most likely to come to Alitalia’s rescue, was one of several investors to snub the rights offer. The Franco-Dutch group said Alitalia’s pledge to make severe cost cuts was not enough to save it without its creditors having to write off some of its debts.
Over the years other major airlines including Air France-KLM, Lufthansa (LHAG.DE) and British Airways (ICAG.L) have flirted with partnering the carrier - which offers access to Europe’s fourth-largest travel market and flies 25 million passengers a year - but decided it was too much of a gamble.
On Tuesday, daily la Repubblica said Alitalia and Etihad Airways were in advanced talks on a possible investment by the Abu Dhabi-based airline. Etihad declined to comment.
Sources close to the matter have said in the past few weeks that Etihad had no interest in Alitalia.
Today’s Alitalia is much leaner than the group that was rescued and privatized in 2008. It has a younger fleet, a lower cost base than that of Air France and has long since scrapped staff perks such as free flights and taxis. But a misguided focus on the domestic and regional markets has left it vulnerable to competition from low-cost carriers and high-speed trains on the busy Milan-Rome route.
($1 = 0.7289 euros)
Additional reporting by Praveen Menon in Dubai; Editing by Sophie Walker