Alitalia Starts Bankruptcy Procedures: What Does This Mean for Travelers?

May 2, 2017

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After decades of financial trouble, Alitalia’s shareholders unanimously voted today to enter bankruptcy procedures. This comes in the wake of the airline’s crew rejecting a $2.2 billion recapitalization plan that would have kept the carrier afloat — but would have also meant a pay cut to crewmembers, with 1,600 workers being laid off.

Sound familiar? Well, this isn’t Alitalia’s first time in bankruptcy. In 2008, the carrier entered bankruptcy, but turned around with help from an investment from Air France KLM in 2009. Then in 2014, Etihad jumped in to help Alitalia, taking a potentially bankruptcy-saving 49% ownership in the troubled airline. This latter investment seems to have been an especially poor one, and seems to have factored into the Etihad CEO stepping down later this year.

MILAN, ITALY - OCTOBER 20: President of Etihad James Hogan poses for a photo at the end of the press conference at Malpensa Airport on October 20, 2014 in Milan, Italy. The press conference today announced the first Airbus A330 Alitalia livery during the official Expo 2015.? (Photo by Pier Marco Tacca/Getty Images)
Etihad CEO James Hogan was all smiles in 2015 shortly after Etihad took a large ownership stake in Alitalia. Now he’s stepping down. Photo by Pier Marco Tacca/Getty Images.

Is this latest bankruptcy finally going to do Alitalia in? We will have to see. But, unlike with previous bankruptcies and times of financial uncertainty, the airline doesn’t have the full support of the government. The Italian finance minister Pier Carlo Padoan is reinforcing that the airline is a “private company” and saying its future is “in the hands of shareholders and management.” He insists that the government won’t pump cash into the company to keep it afloat, and the country won’t nationalize the airline.

So, when is Alitalia shutting down? Not quite yet. Starting the bankruptcy procedures is a significant legal step, but it’s going to be a bit before it impacts travelers. While the Italian government is making it clear that it’s not going to have a long-term investment into Alitalia, it’s prepared to take steps to “minimize the cost to citizens and travelers” in the short term.

Now that shareholders have voted to enter bankruptcy procedures, Bloomberg explains the next steps for the airline:

A special administrator [will] take formal charge and develop a rescue plan within 180 days, which could be extended for a further 90 days. The plan might entail asset sales, reduced operations and consequently unlimited job cuts aimed at making the airline viable within two years. Alternatively, the person may decide that a turnaround isn’t possible and order the carrier to be liquidated.

Bottom Line

After decades of financial trouble, bailouts and a bankruptcy a decade ago, the troubled Italian carrier Alitalia is back in bankruptcy. Operations will continue for the foreseeable future, pending the appointment of a special administrator and the development of that special administrator’s rescue plan.

If you have any Alitalia flights coming up in the next few months, you’re probably not going to be affected. But, it’s wise to have a backup plan anyways. If you have a flight further out, you might want to look into alternatives now, so you aren’t left stranded without a flight closer to your trip.

H/T: Bloomberg

Featured image courtesy of Gabriel Bouys / Staff via Getty Images

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