Rome prepares to intervene over Alitalia

Date: 08/05/1997

By Chris Johnstone

ROME is considering stepping out of the wings and intervening directly in negotiations with the European Commission over financial aid for Italy's ailing airline Alitalia.

Until now, the Italian government has officially kept a distance from the talks on the proposed cash injection, allowing the airline's management to lead discussions on what both it and Alitalia maintain is a private business transaction.

However, the Commission's insistence that the package should be examined as a state subsidy is leading the government to weigh up whether to take the lead in future negotiations.

Alitalia is asking the Commission to clear a cash injection of about 1.4 billion ecu by its main shareholder, the state holding company Istituto per la Ricostruzione Industriale (IRI), as the normal action of an investor.

Top officials from the Italian transport ministry flew into Brussels for talks with the Commission at the end of last month to find out whether a government initiative was necessary to break an apparent deadlock over the dossier.

“We are checking if the government should intervene at this moment,” said an Italian transport ministry spokeswoman.

Alitalia says it is still sticking to its argument that the current restructuring is the last word on the subject, but company officials appeared to contradict this by adding that there was always room for manoeuvre.

Meanwhile, Commission investigators are continuing to examine Alitalia's restructuring as a state aid and are weighing up how much cash can be cleared as the corollary of the company's pledges to put the loss-making airline on a new path to profitability.

A formal letter spelling out the institution's position has been sent to Rome by Transport Commissioner Neil Kinnock.

The present plan offers a shake-up of Alitalia's regional operations, scaled-down plans for capacity increases, a trimming of the workforce by more than 1,000 by the year 2000 and the creation of a new cut-price long haul carrier.

Meanwhile, the long-running dispute over Olympic Airways - the other outstanding aid dossier occupying Commission officials' minds - still shows no clear signs of being resolved.

The Commission froze a payment of 76 million ecu to Olympic a year ago, accusing it of failing to live up to the initial promises given to secure the cash.

Athens is accused of adding an extra 36 million ecu to the cash paid to Olympic without Commission clearance, failing to dismantle its groundhandling monopoly at Greece's main airports and not allowing the management to have independent control of the airline.

The Greek government has responded to a series of questions from the Commission on these issues, but officials say it is still to early for a verdict to be given on the answers they have received.