Reviving Alitalia: Italy's Loss Making Airline

This was following strikes organized by labor unions on May 06, 2004, in which Alitalia employees took part. These strikes caused major financial damage to the already loss-making company, bringing it a step closer to bankruptcy. The stormy meeting led to the resignation of the entire board of directors, over their "failure" to work out an amicable solution with the agitating labor unions. The Italian government, which held nearly two-thirds equity stake in Alitalia, appointed Giancarlo Cimoli (Cimoli), who was previously head of Ferrovie dello Stato, Italy's state-owned railways, as the company's new CEO. Incidentally, this was the second replacement at the top position made by the government in under three months.

Industry analysts and media reports accused the Italian government of mixing business affairs with political compulsions in view of the elections scheduled in June 2004.

This, they explained the government's inaction in taking any controversial decision like workforce reduction until the elections were over. Alitalia reported net losses of € 519.8 mn in the fiscal year ending December 31, 2003 (Refer Exhibit I for its financial performance during the period 1998-2003). In the first quarter of 2004, the company reported a loss of € 189.2 mn. Company officials attributed this loss to 'a temporary crisis in distribution relations and industrial conflict in the first part of the quarter.'²