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Alitalia faces liquidation as buyers pull out

Italian airline Alitalia faced the prospect of liquidation after a business group that had mounted a rescue bid withdrew its offer on Thursday, citing union opposition.

All members of the CAI consortium voted to abandon the offer -- a blow to Prime Minister Silvio Berlusconi, who had used his business connections and political sway to persuade investors to bid for the 20,000-employee flag carrier and keep it Italian. “The situation is dramatic and we could be facing the abyss,” Berlusconi told reporters, adding that left-wing opposition and unions were to blame. Asked whether this meant Alitalia’s failure, Berlusconi said: “We’ll see.”

The breakdown came a day after Greece said it would close Olympic Airlines and relaunch it as a private-sector company. Airlines are struggling to cope with soaring fuel costs and declining revenues as the credit crunch crimps spending. Alitalia’s government-appointed special administrator Augusto Fantozzi has repeatedly warned that if CAI’s bid fell apart, he would start liquidation proceedings. However, Fantozzi appeared more cautious on Thursday, saying he would begin the difficult task of seeking new funds for Alitalia and "do everything possible to keep it alive."

A €300 million bridge loan granted to the company by the previous center-left government is being questioned by the European Commission as possibly illegitimate state aid. CAI said it had pulled its offer after six of Alitalia’s nine unions refused to sign up for the plan, which would have seen the group snap up only the profitable parts of the carrier. It said the airline’s troubled financial situation -- Alitalia is losing €2 million ($2.90 million) a day -- meant negotiations could not drag on any longer.

Labor Minister Maurizio Sacconi said the withdrawal “paves the way for the failure of all the companies in the Alitalia group.” As the news broke, a leader of one of the three biggest unions said CAI’s withdrawal would be “a social catastrophe.” “The company is dead and some of my colleagues want to be its undertakers,” said Luigi Angeletti, head of the UIL union, referring to other unions’ refusal to agree to the deal.

However, the news was welcomed with applause by many Alitalia staffers gathered at Rome’s Fiumicino airport and outside the CAI’s meeting in Milan. “The offer didn’t make any sense,” said an Alitalia steward in Rome who asked not to be named. “Why would anyone accept having their pay halved and ridiculous hours and conditions?

People would rather go and find jobs as waiters.” Pilots’ union ANPAC, which had staunchly opposed CAI’s plan to slash thousands of jobs and cut salaries, said more talks could have led to a compromise. “It’s a shame. In my opinion the conditions were there for a deal. Now they (CAI) are off and we’re still here with our extremely serious problems,” Fabio Berti told reporters.

 
NATIONAL SYMBOL

Alitalia, a national symbol for more than 60 years, has long suffered from political interference and union unrest and, more recently, from soaring fuel costs and an economic downturn stinging the travel sector worldwide. Even Pope Benedict, who like his predecessors flies Alitalia on trips abroad, said he was praying for the airline last week. CAI’s rescue plan was the third attempt in less than two years to sell the state’s 49.9% stake in the airline, which last posted a profit in 1999.

Under the former center-left government last year, Air France-KLM agreed to buy Alitalia. But that bid was blocked by unions and opposed by Berlusconi, then leader of the opposition. He ran a successful election campaign in April vowing to keep Alitalia alive and Italian.

Sources close to Fantozzi said he was in contact with Deutsche Lufthansa AG, Air France-KLM and British Airways Plc -- which he said had all expressed interest in a minority stake in Alitalia if CAI’s bid had succeeded. (Reuters)