Alitalia facing administration as employees reject cost cutting plan

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Alitalia is facing the possibility of going into administration after employees rejected plans to reduce costs by cutting jobs and salaries.

The Italian airline says the deal rejected by the workforce would have unlocked €2 billion of recapitalisation including more than €900 million of new finance.

Unions and the company had approved the pre-agreement on 14 April, and shareholders will meet on 27 April to discuss what the workforce’s decision could mean for the future of the airline.

In a statement, Alitalia says: “Given the impossibility to proceed with the recapitalisation the board has decided to start preparing the procedures provided by the law.”

Partner in the restructuring & corporate recovery team at international law firm Taylor Wessing, Neil Smyth comments Alitalia is the latest national carrier facing insolvency proceedings as it vies with low cost and budget airlines in a competitive market.

He says airlines particularly in the US have used insolvency to drive necessary restructuring to streamline operations and remain competitive.

Smyth says: “This can be harder to achieve in mainland Europe where employment laws provide stronger protection for employees resulting in the position that you are currently seeing in Italy where employees have rejected Alitalia’s rescue plan in the hope that the government, possibly through a special administration, will bail out the airline.”