Accord will allow the airlne to set in motion a viability plan to restructure itself

The European Community Transport Commisioner, Loyola de Palacio, has confirmed that Alitalia has reached an agreement with its labor unions that will allow it to begin restructuring itself under a viability plan. "This is a first important step in the indispensable restructureing process" for the airline, said De Palacio.

Alitalia closed a deal with its labor, which calls for a reduction of 3,700 people from its workforce, down 1,300 from the original 5,000 planned layoffs. De Palacio issued a press release in which she expresses her satisfaction "that the sense of responsibility of all parties involved in this matter has prevailed."

The European Commission will now have to issue its ruling on the plan once it examines the details as communicated to them by the Italian government. Once the restructuring plan is approved, the company will be able to benefit from a 400 million Euro loan, approved by the Italian Parliament with the blessing of the European Community, in order to take care of its most urgent financial problems.

Two months ago, the European Commission approved Alitalia's rescue plan presented by the Italian government. The plan set forth the granting of the bridge loan and the subsequent restructuring of the company, without any further assistance from the govermnent.

At that time, the EC warned that it would keep a close eye on the proceedings to make sure that no additional supplementary help is added to the restructuring, given that Alitalia has already benefitted from such a financial tool in 1997, and regulations only allow one such bailout.

The plan approved by the EC also includes a pledge on the part of Italian authorities to divest themselves from their share of the company in "a term not to exceed 12 months," which can only mean that the airline is about to be privatized. The Italian government currently holds 62 percent of outstanding Alitalia shares, and has agreed to reduce its participation to 49 percent in 12 months or less. This guarantees that there will be no recapitalization on the part of the state after the restructuring is complete.

FMI: www.alitalia.it