Agreement rescues Alitalia airline company

On 25 September 2008, following difficult negotiations in a bid to save the financially troubled Alitalia company from liquidation, two agreements were reached for a new national airline company. The first agreement, reached between the government and trade unions, concerns the industrial plan for the new airline company. The second agreement, reached between the trade unions and the Italian Airline Company, provides for the distribution of workers in the company.

The Italian airline company Alitalia has been in the midst of an economic crisis for many years. As a result, Italy’s then centre-left government headed by the former Prime Minister, Romano Prodi, decided to sell the company to the best buyer in accordance with a European procedure.

The sales procedure, initiated on 1 December 2006, led to the selection of a number of offers. In the end, the Italian government entered into negotiations with the Air France-KLM group.

Negotiations with Air France-KLM

In March 2008, following a government crisis and the announcement of an early election for 14 April, Air France-KLM announced that it would withdraw its offer if the trade unions and future government refused to accept its industrial plan. A particular focus of the negotiations was the number of future redundancies, which was expected to be in the region of 2,100 job losses.

The new centre-right coalition government, led by Prime Minister Silvio Berlusconi, openly opposed the Air France-KLM solution and Mr Berlusconi announced that he would find an alternative solution. Due to trade union and government opposition, on 2 April, Air France-KLM finally withdrew its offer.

Government rescue measures for Alitalia

However, the financial crisis at Alitalia continued to worsen and, on 22 April 2008, the Prodi government granted the company a bridge loan of €300 million. On 11 June, the EU launched an investigation to verify whether this loan complied with the norms regarding state assistance.

On 30 May, the new government decided to address the company crisis by nominating the Italian banking group Intesa SanPaolo as its advisor.

On 29 August, top management at Alitalia asked the Tribunal of Rome for permission to introduce the procedure of compulsory administration. Subsequently, the government put the company under the control of a special administrator – Augusto Fantozzi, a prominent jurist – who was assigned responsibility for organising the company’s restructuring, if possible, or otherwise its liquidation.

Legislative measures to reorganise internal market

The introduction of a free market in air transport has led to a fragmentation of the internal market, characterised by the presence of an increasing number of low-cost companies, which are financed by local authorities interested in promoting the use of local airports. The two most important national enterprises, Air One and Alitalia, have a combined control of less than 50% of the internal market. Without a complete reorganisation of the entire air transport system, it will not possible for the new Alitalia to control the 60% of the internal market required to make it possible to negotiate a partnership with a large European company.

In order to enable this reorganisation, the Berlusconi government has introduced two distinct legislative measures. The first measure suspends the regulations which ban the possibility to maintain a dominant position in the national air transport market. The second measure allows the special administrator of a company in crisis situations to reorganise it into two distinct legal entities. The special administrator, Mr Fantozzi, has adopted these two measures: as a result, all of Alitalia’s active assets will be concentrated into one society, which will be put up for sale, while all of its liabilities, debts, non-remunerative activities and excess personnel will be absorbed into a ‘bad company’, which will place its employees on a mobility list up to liquidation.

Industrial plan of Italian Airline Company

The Italian Airline Company (CAI), encouraged by the government, was set up by a large group of Italian entrepreneurs led by Roberto Colaninno, owner of the scooter manufacturer Piaggio. CAI presented its industrial plan to the government and trade unions.

The plan foresees that the new airline company would buy the activities of both Alitalia and Air One. Furthermore, it would maintain the Alitalia brand name and organise its operations network around six airports in Catania, Milan, Naples, Rome, Turin and Venice. However, the plan also provides for reductions in the size of the airline fleet, from 220 to 137 aeroplanes, and in the number of routes, down to 16 intercontinental routes and 49 routes between Italy and Europe. After these measures are put in place, the new company would start negotiations to set up an industrial partnership with a large European group – either Air France-KLM or Lufthansa, both of which are interested in having a minority participation in the capital of the new company.

Mr Fantozzi, having received no other proposals, acknowledged CAI as the only possible future purchaser of Alitalia.

Difficult negotiations end in agreement

Negotiations subsequently commenced on 4 September 2008 between CAI and the 10 trade unions operating in Italy’s civil aviation sector: the Italian Federation of Transport Workers (Federazione Italiana Lavoratori Trasporti, Filt-Cgil), the Italian Transport Federation (Federazione Italiana Trasporti, Fit-Cisl), the Italian Union of Transport Workers (Unione Italiana dei Lavoratori dei Trasporti, Uiltrasporti), the General Union of Transport Workers (Unione Generale Lavoratori dei Trasporti, Ugltrasporti), the Union of Pilots (Unione Piloti, UP), the Italian Association of Flight Assistants (Assistenti di Volo Italiani Associati, Avia), the Workers’ Union (Sindacato dei Lavoratori, SdL), the National Association of Flight Assistants (Associazione Nazionale Professionale Assistenti di Volo, Anpav), the National Association of Civil Aviation Pilots (Associazione Nazionale Piloti Aviazione Commerciale, Anpac) and the Air Traffic Management Professional Project (ATM-PP).

Two independent negotiations took place.

The confederal trade union organisations, the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), the Italian Confederation of Workers’ Trade Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil), together with the General Union of Workers (Unione Generale del Lavoro, Ugl), reached an agreement with the government regarding the CAI industrial plan. However, the professional associations representing pilots and the non-confederal trade unions representing flight personnel, which were not invited to these negotiations, rejected CAI’s industrial plan.

Separate negotiations took place involving all the worker representative organisations at which the deployment of workers within the new company was discussed.

Cgil withdrew its approval of the industrial plan due to considerable resistance from the pilots’ associations and owing to difficulties arising from the fact that the new company was proposing modifications in the working conditions previously in place at Alitalia.

Following difficult negotiations, the government and Mr Colaninno of CAI managed to find a solution, and on 27 September, an agreement was signed with all the professional and trade union organisations.

Details of agreements

The framework agreement – reached between the government, CAI and the trade unions on 14 September 2008 – stipulates that the new company will have to break even in ‘little more than two years’ and remain in Italian hands until 2013. At the same time, CAI’s members must maintain their share in the company for at least five years. Furthermore, if the new company is quoted on the stock market, it must remain in possession of at least 51% of the company’s shares. Future foreign partners will be able to obtain minority participation.

CAI will hire 12,500 workers, including 1,550 pilots, 3,300 flight assistants and 7,650 workers, such as employees, trainee managers and managers. The 3,250 workers of Alitalia and Air One who are excess to requirements will be entitled to benefit from an Extraordinary Wages Guarantee Fund (Cassa Integrazione Guadagni Straordinaria, Cigs) and will be put on a mobility list for seven years (three mobility and four Cigs). The workers on Cigs or on mobility will be guaranteed 80% of their salary.

Should any new personnel be hired on fixed-term employment contracts in the new company, they will have to be chosen from the workers on Cigs or from among those who are currently on fixed-term contracts which are about to expire.

The company agreement which regulates working conditions foresees a single contract covering three distinct contractual areas for each category: that is, for pilots, flight assistants and ground staff.

The agreement modifies the salary levels of pilots and flight assistants, providing for an average monthly salary reduction of between 6% and 7%. However, the agreement also guarantees that there will be no wage cuts for monthly salaries ranging between €1,200 and €1,300.

Reactions to agreements

According to the General Secretary of Cgil, Guglielmo Epifani, ‘generally speaking, the agreement reached is very positive’.

The General Secretary of Cisl, Raffaele Bonanni, while highlighting the role of Cisl in the signing of the agreement, added that those who had a strong sense of responsibility had been rewarded in the end.

Meanwhile the General Secretary of Uil, Luigi Angeletti, stated that preventing the definitive closure of Alitalia meant avoiding ‘a social and economic tragedy’.

The Chief Executive officer (CEO) of CAI, Rocco Sabelli, said that he was pleased to have succeeded in protecting the industrial plan.

Commentary

While the agreement reached represents the only conclusion possible, the negotiations have led to a deterioration in relations between Cgil, Cisl and Uil. Many observers have attributed Cgil’s change of direction regarding the industrial plan to its strong clash with the centre-right government. Cgil organised its own protest against the government for opting for unilateral initiatives rather than collaborative measures with the other confederations. This decision may also lead to negative consequences regarding the conclusion of negotiations concerning the reform of bargaining with the Confederation of Italian Industry (Confederazione Generale dell’Industria Italiana, Confindustria). In fact, Cgil has already declared that it believes the negotiations have broken down, although the other confederations are of the opinion that a positive solution is close at hand.

Vilma Rinolfi and Domenico Paparella, Cesos