April 13, 2017 / 6:25 PM / 3 months ago

Last-ditch talks between Alitalia, unions fail to break deadlock

3 Min Read

Alitalia advertising banner is seen on building downtown Milan, Italy, May 20, 2016.Stefano Rellandini

ROME (Reuters) - Talks between Alitalia, labour unions and the government dragged into the evening on Thursday as workers baulked at the prospect of heavy job and salary cuts that Italy's flagship carrier says are necessary to keep operating.

The latest turnaround plan for the ailing airline envisages cutting more than 2,000 jobs among ground staff and reducing flight personnel's salaries by up to a third in a last-ditch attempt to make the company profitable.

The government had hoped to win union backing for the plan by April 13, so that investors in the airline, which include Etihad Airways with a 49 percent stake and Italy's top two banks Intesa Sanpaolo (ISP.MI) and UniCredit (CRDI.MI), could launch a cash call on the following day.

But the unions, whose support for the plan is crucial for shareholders to unlock fresh financing, said they were unwilling to accept any further sacrifices.

"There is still a wide gap between the sides both on job cuts for ground staff and reducing flight personnel's wages," a labour union source said.

Alitalia CEO Cramer Ball has called the planned cuts "painful but necessary", but workers say they want more evidence that the restructuring would bring the promised results, especially given a string of failed revamps.

"How can we make concessions when we don't even know where the plan will take us?," Giancarlo Serafini, a member of the Uiltrasporti union delegation attending the talks, said this week.

Some union leaders said there was an expectation among workers that the government would not let a company employing 12,500 people fail.

Alitalia has made an annual profit only a few times in its 70-year history.

Despite several overhauls and cash injections over the years, it is losing at least half a million euros a day and could run out of cash in coming weeks unless shareholders agree to pump in more money, sources say.

Industry Minister Carlo Calenda has said the financing package for Alitalia is worth 2 billion euros (1.69 billion pounds), including an emergency cash injection of 400 million euros to keep it afloat if the rescue plan does not work out as expected.

The restructuring targets a return to profit by the end of 2019 through 1 billion euros of cost cuts and a revamp of its business model for short and medium-haul flights.

After buying into Alitalia in 2014, Etihad pledged to return it to profit by 2017 by slashing costs, turning Rome into an intercontinental hub and growing lucrative long-haul routes.

But the turnaround faltered in the face of competition from low-cost airlines such as Ryanair (RYA.L) and high-speed rail services, while deadly attacks across Europe have dented demand for travel.

writing by Silvia Aloisi, editing by David Evans

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