GAC

The President of Alitalia has warned its labor unions that the airline will file for liquidation in 22 days (September 15), unless a plan of reorganization, streamlining and cost cutting is approved by all parties concerned. The airline has lost 330 million Euros during the first six months of the year, and its domestic market share has dropped from 60% to 40% (due to the success of low-cost domestic competitors).

Stay tuned for further developments, and DON'T PANIC!!!. Alitalia is a member of the Sky Team Alliance, so its tickets might be honored by partners Delta (another troubled carrier) and Air France.

POWERPUFF71

i leave thursday for 11 days in sicily. i guess i meet the 22 days deadline but i am still a little worried. last year i dealt with delayed luggage and late flights. i was hoping this year would be better.

TopMan

Don't panic???? because another member of the Star Alliance "might" honor the tickets...get real...
"information" like this does nothing but CAUSE concern to people holding tickets.

The "rule" that requires other airlines to honor tickets issued from a business in total liquidation says only that the other airline must do so on a standby basis..and that whole requirement expires in November.

The latest "President's messagequot; could be no more than sabre rattling or something more.

GAC

TopMan: you are correct that there is no legal requirement for other members of the Alliance to honor tickets of a failed Alliance member. Nevertheless, one can reasonably expect that Delta and Air France will attempt to accommodate passengers, not for the sake of Alitalia, but for their own sake.

As for Cimoli's [The Alitalia President] alarmist comments; yes, I don't doubt that he is trying to create a sense of inevitability as a means of saving the carrier. Sometimes times get done under extreme pressure.

Nevertheless, the stark black and white figures reflecting significant sales and market share loss, negative profits, and cash-on-hand rapidly evaporating, cannot be disputed. Indeed, according to the Rome newspaper Il Messaggero, Alitalia does not have enough cash to pay both salaries and aviation fuel for the month of September.

marchy007

So, what happens with the tickets if Alitalia goes belly up. Will they refund them?

GAC

An airline with no cash to pay salaries for employees or to purchase jet fuel won't reimburse the cost of the ticket!!!!!

TopMan

I'd worry about it WHEN and IF it actually happens.

GAC

Update as of 30 August: Alitalia reports that it has 72 Million Euros cash on hand, enough to pay salaries thru September. Gianfranco Fini, Deputy Prime Minister, says that liquidation of the company is "dramatically near" (in the absence of a radical restructuring). More to come .......

GAC

Update as of 10:22 EST: The European Commission Transport Minister, Loyola de Palacio, stated that the future of Alitalia is now in the hands of the labor unions, and that personnel cuts are essential for the survival of the company. A momentous negotiating session between Management and Unions is scheduled for Monday Sept. 6. More to come .....

wanda

I have Alitalia tickets for mid October and spoke with one of the managers there. She said that things will be fine but, if they are not, since they are members of the Sky Team Alliance, Delta or Air France would honor all tickets.

flanneruk

wanda:

An employee of a possibly bankrupt business makes a promise about two, quite separate, airlines being prepared to bail out Alitalia customers if Alitalia's owners won't?

Put it in the same league as "the cheque's in the post" or "I'm from head office and I'm here to help you"

Ryan

Delta and AirFrance honoring tickets isn't that far-fetched. At least as it relates to travel within the US, other carriers are legally required to honor tickets in many, not all, circumstances. From Delta and AirFrance's perspective, they'll fill empty seats and get the revenue.

The issue however is that Delta and AirFrance are only likely to honor tickets on their pre-existing flights. So, to the extent that there aren't enough seats to go around, then you need a plan B.

The real issue with Alitalia is whether or not they will continue to operate if a bankruptcy filing occurs. From my understanding of Italian bankruptcy law, prior to the failure of Parmalat, few mechanisms existed in Italian law for a company to avoid liquidation. However, last December the Italian government pushed through a "large company" bankruptcy law that allowed companies to operate in bankruptcy with the intention that Italians would be able to control the situation and run the company, rather than liquidate. Doesn't mean they won't eventually fail, but it can buy them time.

Based on my experience working with bankrupt companies and seeing how the situation with SwissAir played out, either the unions will backdown (recognizing the they'll strike at some point as is the birthright of every Italian worker), the airline will file bankruptcy and use the new law to try and operate or they'll do what SwissAir did and they'll find someone to come in and takeover the business.

The wildcard in all of this is the reaction of the Italian unions. Relative to their counterparts at the US airlines, I'm sure they are more militant in their views.

Wildfire

Ryan. you explained it well. thanks

GAC

Roberto Castelli, Italy's controversial justice minister, has labelled Alitalia as a "sick giant which continues to think as a State monopoly, and which is operating not only outside of [the economic realities] the marketplace, but also outside of reality, for which a radical restructuring is necessary... everything must be changed!" More to come .....

PLMN

So what's the scoop? When do I worry about the tickets my parent's have for Alitalia? Mom's are paper tickets, something to do with her first and last legs being on Delta, so said the Orbitz rep when we purchased the tickets.

Dad's ticketes are e-tickets because he is only on the Alitalia flights.

I was reviewing the travel insurance policy I purchased and it covers financial default of many companies, but I don't see Alitalia listed. Does that mean I'm out of luck???? I don't understand any of this. I thought that if an airline goes out of business other airlines will fly you. Oh, gosh what do I do?

I tried to call Orbitz but the phones have unusual heavy call volume. I suspect that it is because WE ARE HAVING ANOTHER HURRICANE!!

I should be doing more prep for Frances but have no clue how to put up the plywood. Hubby is at work protecting and serving. So what else, I'm working on the trip to Italy.

beachbum

According to GAC, Alitalia's president is using the word liquidation, not re-organization. Liquidation means shutting down operations, selling all the assets, and using proceeds to pay creditors. There almost certainly wouldn't be enough to refund tickets.

And, unless they go to the front of the creditor line, I fail to understand how Delta or Air France would get any revenue by honoring a bankrupt Alitalia's ticket. So, why should they?

flanneruk

Beachbum:

It's obviously nonsense that Delta or Air France would honour a bankrupt airline's tickets for the revenue. Not quite as nonsensical as believing the assurances of an Alitalia employee about the behaviour of Delta and Air France were Alitalia to collapse.

But there is another reason why Delta might honour Alitalia tickets. Delta's financial position isn't that much better than Alitalia's: the last thing in the world it wants is for the travelling public to start getting frightened about buying tickets from financially-strapped airlines.

Air France, OTOH, is in a completely different position. Since it's utterly solvent (just like BA and Lufthansa), it's really in its interest for all the dodgy airlines - Delta, Alitalia, United and the rest - to suffer. And it's in its interest to deter travellers from using the dodgy airlines. And, were Alitalia to go bust - or even more importantly to get into worse trouble - I'm not sure European competition law would tolerate Air France's implicit subsidy of a bankrupt European airline.

Air France's first loyalty is to itself, and to whoever comes next under French insolvency law. Its loyalty to other Alliance members comes way down its list of priorities.

The most interesting thing about the Alitalia case might well be the damage it does (hurrah!!!) to the anti-consumer cartels the airlines have been allowed to create.

almesq

The fate of the airline is in large part in the hands of the union. The head of the union said the other day they are ready to negotiate and it would be a disaster if the company went into administration (their version of bankruptcy). Alitalia then announced it would cut approximately 7000 of its 20,000 jobs, some of which would be reassigned to other Alitalia companies. Today, Alitalia announced that it would seek 2 billion Euro of capital infusion and put it towards restructuring the company. They are clearly attempting to make plans for the future and will probably make every effort to make a deal with unions. Again, we have to see how the unions cooperate, but they don't want the company to go under also.
I have tickets on Alitalia for September 17. (The pilots have already scheduled strikes for Sept. 10 and 17.) I have purchased back up tickets on Delta for the same dates I have now. The tickets are refundable, so that I can use them if I need to, get a refund if I don't need them. We spoke to Alitalia, and they also told us that if the worst happens, they will attempt to make arrangements with other member of the alliance and move us the their flights. You must remember, however, that those flights are already fairly full, and not everyone can be moved. Also remember, that certain Delta flights to Italy are actually codeshare with and operated by Alitalia on Alitalia flights, so that if they don't go, Delta will obviously give preference in filling their seats on their flights to people who actually bought tickets from Delta on Alitalia codeshares.
So, bottom line is "who knows". I bought the other tickets just as a safeguard, and I certainly hope I don't need them. We'll just have to watch closely.

PLMN

Here is what I know...nothing

I called Orbitz with whom I booked the flights...they know nothing except "something will be done."

I called Access America with whom we have our travel insurance...except Alitalia is not covered.

I called Alitalia and just like with the company I work for...the workers know nothing. Except that they said one of their "partner" airline comapnies will "probably" help out.

Mom is code share with Delta, but dad is strictly Delta.

Serves my mom right this extra worry...she didn't want me to book strictly on Delta because they had filed bankruptcy...hahahaha. They are still flying!

Soooo...I swear I will try to not worry about this now since it is out of my hands and concentrate on staying safe in the hurricane.

(I wish we could afford to purchase back-up tickets.)

Ryan

Beachbum,
After 9/11, Congress enacted legislation which requires airlines to honor the tickets of airlines that have stopped flying. At most, they can charge a $25 fee. But, not sure if this legislation extends to foreign carriers going to/from the US.

In terms of the airlines taking Alitalia risk, there are numerous variables such as consumer protection laws in Italy. Certainly cash will be generated in a liquidation. Whether carriers who provide service can get the US equivalent of a priority claim, who knows.

Bottom line, it's a mess and mess that will probably be repeated numerous times with other European carriers in the next few years.