Deals and IPOs

Alitalia Unions Criticize Air France Job Cuts Plan


Alitalia's unions in a joint statement on Friday sharply criticised Air France-KLM's modified plan on job cuts, but said they planned to attend a Monday meeting with the two carriers' management.

** FILE ** An Alitalia Boeing 777 is parked at Leonardo da Vinci International Airport in Rome, in this Aug. 27, 2002 file photo. The European Union is likely to approve Italy's plan to bail out state-controlled airline Alitalia with a euros 400 million (US$488 million) bridge loan, EU Transport Commissioner Loyola de Palacio told reporters Tuesday, July 13, 2004 after meeting with Italian ministers. (AP Photo/Massimo Sambucetti/FILE)
Massimo Sambucetti

The Franco-Dutch carrier, which has said it will ditch the deal without union support, eariler on Friday agreed to take on an extra 12 percent of staff from Alitalia's ground services unit in a concession to try to appease the unions.

Air France-KLM, also battling resistance from top Italian politicians and Milan's airport operator, says it will scrap the deal without union support. The deal is considered Alitalia's best hope of averting bankruptcy.

After an initial stalemate in negotiations with the unions, Air France-KLM on Friday unveiled plans to hire about 900 more employees of Alitalia's troubled ground services unit, according to a document seen by Reuters.

Air France-KLM would now retain 4,191 workers out of about 7,400 employees at Alitalia's AZ Servizi ground services unit, compared with 3,300 in an earlier draft. It then plans to cut 500 positions from those taken on and still wants to reduce Alitalia's 51 percent stake in the unit.

The response from unions, who were due to meet later on Friday to discuss the new proposal ahead of talks on Monday with the French carrier and Alitalia management, was negative.

"It appears to be a plan with big cutbacks causing too many redundancies, and if it is not changed notably, I don't see much chance of it progressing," Marco Veneziani, head of the UIL union's transport section, told Italian television.

Job Cuts

Air France-KLM confirmed plans to cut about 1,600 jobs at Alitalia's airborne operations and shut its cargo unit in 2010 -- drawing a sharp rebuke from the carrier's main pilots' union.

"There has not been any type of progress," said Anpac union chief Fabio Berti, adding they were ready to even let the airline go bust. "It is an extremely serious situation. For us pilots, the Air France-KLM plan is finished. A chapter closed."

The Franco-Dutch carrier also offered retirement benefits or the possibility of jobs with Air France-KLM to pilots and flight assistants expected to lose their jobs in its new plan.

Air France-KLM said any further concessions would undermine its plans for Alitalia, whose board meets on Friday to discuss extending the negotiations beyond the initial March 31 deadline.

Air France-KLM has already agreed to continue talks beyond that date but Alitalia says it needs more time to study the legal and financial implications of such an extension.

Even if Air France-KLM manages to convince the unions, it still faces opposition from Milan's airport operator SEA, which has sued Alitalia for $2 billion over plans to cut flights.

There is also a potential veto from Italy's next government if media magnate Silvio Berlusconi wins an election in April as opinion polls suggest.

Berlusconi has turned Alitalia's fate into an election issue by promising a rival Italian bid will emerge to thwart Air France-KLM's "unacceptable" offer. Political rivals have dismissed the idea as election rhetoric.

Alitalia shares were suspended from trade in Milan early on Friday after being indicated down nearly 30 percent. They had risen sharply in recent days on talk of a rival Italian bid.

But three of the Italian companies named in a newspaper on Thursday as being interested clearly denied any involvement.

Despite Alitalia's long list of troubles -- from difficult unions to tough competition from low-cost carriers -- it appeals to Air France-KLM because it controls the lucrative Milan to Rome route and offers a foothold in heavily-visited Italy.

Air France-KLM is betting it can restore the carrier -- which it is picking up for just two days' worth of revenues in a share swap offer -- to a profit in two years. It will also buy back its bonds and pump in 1 billion euros in a capital hike.