Abu Dhabi, UAEMonday 20 May 2019

Blame Alitalia’s employees for this latest scary scenario for the airline

The rejection of a rescue plan for the Italian carrier by its workers is the result of populism; a long wave that has hit Europe and the United States in the last year.
An Alitalia Boeing 777. Back in the 1960s, Alitalia was the third airline in Europe and ranked 7th worldwide. Courtesy Alitalia
An Alitalia Boeing 777. Back in the 1960s, Alitalia was the third airline in Europe and ranked 7th worldwide. Courtesy Alitalia

MILAN // A weird 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 covered 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: ‎€1 million per day. Since the 1970s the company has cost Italian taxpayers €7.4 billion in public financing.

Why? Alitalia counts some 12,500 employees for only 120 planes and 30 million passengers per year. Low cost 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. The then prime minister Silvio Berlusconi 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 6 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 3 years, the Abu Dhabi based company risks losing all it has done after the airline’s employees refused to approve the latest rescue plan. So now it appears that Alitalia has no other choice than filing for bankruptcy: under the italian law this would bring in government-appointed chief executives (probably 3) to run the company for 6 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. Italian prime minister Paolo Gentiloni 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 last 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 they are not solving their problems: the unemployment rate is at the highest historical levels among youngsters; 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.

Simone Filippetti is a finance & economy reporter at Italian daily newspaper Il Sole 24 Ore.

filippettinews@twitter.com

Updated: April 27, 2017 04:00 AM

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