page_title: Financial situation of Alitalia
section_title: History
hierarchical_section_title: Financial situation of Alitalia / History
caption_attribution_description: English: Alitalia Airbus A320-200 (I-BIKB) takes off from London Heathrow Airport, England.
context_section_description: Alitalia has lost money for years owing to problems linked to  government and political interference. It has reported only one year of profit (1998) since its foundation in 1946. Alitalia reported net losses of more than €3.7 billion between 1999 and 2008. Previous state aid to Alitalia included some €1.5 billion in 1998 from the government of premier Romano Prodi. In 2002 Alitalia received a capital increase of €1.432 billion under the government of Silvio Berlusconi. In 2004 the Berlusconi government gave a €400mn 'bridge' loan to Alitalia. In 2005 the capital of Alitalia was increased by €1.6 billion, including an over €500mn bond float issued with the promise of a return to profit in 2006. (Unfortunately the year ended with a loss of €626 million). The Italian government and some other organizations have invested €4.9 billion since 1998.
  In September 2004 the airline found itself in financial difficulties, with management saying it did not have enough cash to pay worker salaries past the end of that month. It announced plans to lay off 5000 employees and to split the company into two divisions, an airline and a ground services division. It also said it was reconsidering its alliance with Air France. Talks went on with unions for pay cuts and layoffs, in an attempt to keep the company out of bankruptcy and possibly liquidation. On 24 September 2004, the company announced that it had reached an agreement with unions allowing access to a bridging loan from the Italian government.
  Alitalia's troubles had now become so severe that Consob, Italy's stock market regulator, required it henceforth to report monthly on its debt and cash positions.
  The government could in 2006 no longer offer support to the failing airline since it had been forbidden by the European Union to inject new capital. Therefore, as all other attempts to save the company had failed, the Italian government announced its willingness to lead Alitalia towards privatization by lowering its part of ownership in it. A public notification was given in January 2007, seeking a buyer who would acquire at least 30.1% of Alitalia, and also guarantee the airline's 18,000 jobs, domestic routes, and the Italian identity of the Alitalia brand, according to the tender document published on the Treasury Web site. Italy invited bids to be submitted by January 29, 2007. (Under Italian law, a buyer of more than 30% of a company must make a public offer to buy out the other shareholders.) In July 2007 the last of the bidders for Alitalia backed off, making the procedure fail.
  In September 2007, Maurizio Prato, at that time chairman, told senators in Rome "Alitalia is in a comatose state, it is in the intensive care unit". Further he said:  "Personally, I am surprised by the general refusal to accept reality and by the fact that a company in this state does not have the possibility, even though it is listed on the stock market, to make autonomous decisions even if this is needed for its survival".
  Another attempt was made to sell the 49.9% stake of the Italian government through a different procedure, involving the selection of a single major partner with whom to contract.
  On December 6, 2007, three parties (Air France-KLM Group; an investment group led by businessman and lawyer Antonio Baldassare; and a group composed by the Italian domestic carrier Air One and several banks) presented proposals to purchase Alitalia. The Board of Directors of Alitalia announced the Air France-KLM Group as the winner. In March 2008 the Air France-KLM Group offered a share swap of €0.10 per share, a total of €138 million. The Air France-KLM Group offered to pay €608 million for the convertible bonds issued by  Alitalia. The company would also invest €1 billion in Alitalia by selling new shares of Alitalia. Air France-KLM Group intended to maintain the Italian identity of Alitalia and an Italian would have a seat on Air France-KLM's board. It would restructure Alitalia's flight network, basing the bulk of its operations at Rome Leonardo da Vinci Fiumicino Airport and cutting international flight
caption: Alitalia Airbus A320-200 takes off from London Heathrow Airport, England (2008)
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