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In October 2003, the board of the Italian airline Alitalia approved an industrial plan for 2004-6 which envisaged 2,700 redundancies. The plan triggered a fierce conflict with the trade unions and led, on 19 January 2004, to a strike throughout Alitalia. The dispute between the management and the unions also involved the government, which declared itself willing to intervene to provide support measures for workers if job cuts were made. At the end of February 2004, the managing director of Alitalia resigned. The new chief executive resumed talks with the unions and revised the business plan, which no longer centred on cost cutting, but on boosting investments. Finally, in April, the government announced the imminent issue of a legislative decree to assist the entire air transport industry.
Alitalia, the Italian national airline, has been in serious difficulties for some time. The crisis began in the mid-1990s when the low-cost airlines began to enter the domestic market (IT0205202F, IT0201178F and IT0203101N). Since then, the growth of these airlines has eroded Alitalia’s share of domestic traffic, which fell from 76% in 1996 to 51% in 2003 (the lowest level among all the European 'flagship' airlines). This drastic decline in performance has reduced Alitalia’s earnings and the company has been operating at a loss since 1999 (in 2003 its operating deficit was EUR 373 million, which was EUR 250 million worse than in 2002, when it amounted to EUR 118 million).
Industrial plan
This financial situation would soon have pushed the company into bankruptcy, so in October 2003 the Alitalia board of directors was forced to issue an 'industrial plan' for 2004-6 which envisaged large-scale job cuts. The plan foresaw 2,700 job losses, of which 1,500 would involve workers taking voluntary redundancy, with 12,26 workers outsourced to services transferred or subcontracted to external companies. The trade unions announced their opposition to the plan, on the grounds that it was concerned only to cut costs, not to relaunch the company, and they called for talks to be held with the government. At the same time (early November 2003), the majority shareholder - ie the government, which through the Ministry of the Economy owns 62.4% of Alitalia’s stock (so that the airline is a publicly-owned company) - approved by cabinet decree a scheme to begin privatisation of the airline. However, this decision provoked a split within the centre-right government majority ranks, between those political groupings in favour of Alitalia’s privatisation and those opposed to it. The latter prevailed, with the result that the privatisation decree was blocked in parliament and its discussion postponed until a later and unspecified date.
Meanwhile, in order to save EUR 47 million a year, the Alitalia board of directors decided to freeze the pay increases (around EUR 150 gross per month for each employee) due to the workforce in order to adjust their wages to inflation between 2002 and 2003. This decision, which worsened relations with the unions further, was reversed at the beginning of January 2004, and the board decided to grant the pay increases.
In mid-January 2004, talks between the trade unions and management on the Alitalia restructuring plan began at the Ministry of Transport. However, no progress was made, and when the negotiations ground to a halt the Alitalia workers resumed protests. On 19 January, all Alitalia personnel were called out on strike. The strike was organised by all the trade unions in the company apart from the pilots’ unions - the Commercial Aviation Pilots' National Association (Associazione nazionale piloti aviazione commerciale, Anpac) and the Pilots' Union (Unione piloti, Up) - and affected both ground staff and cabin crew . The most representative unions for ground staff are those affiliated to the three main confederations - the Italian Transport Workers' Federation (Federazione italiana lavoratori trasporti, Filt-Cgil) the Italian Transport Federation (Federazione italiana trasporti, Fit-Cisl) and the Italian Transport Workers' Union (Unione italiana lavoratori trasporti, Uilt) - plus the Transport Workers' Unitary Trade Union (Sindacato unitario lavoratori trasporti, Sult). For cabin crew the most representative unions are the three confederal transport unions, plus the National Flight Attendants Professional Association (Associazione nazionale professionale assistenti di volo, Anpav) and the Italian Flight Attendants' Association (Associazione italiana assistenti di volo, Avia).
There was a massive turn-out for the strike, not only among ground staff but also among pilots and flight attendants, and Alitalia was forced to cancel 364 flights.
Recovery plans
During the early months of 2004, the three parties involved (company, trade unions and government) came up with proposals for the recovery of the airline. These proposals were put forward by: the unions in the aftermath of the January strike; the new Alitalia chief executive after the resignation (on 24 February 2004) of the former managing director; and the government, which has promised the imminent issue of a decree in support of the entire air transport sector. Although presented by different actors, all the plans seek a solution acceptable to all the parties concerned. Details of the three proposals are as follows.
Trade unions’ counter-proposal
In the aftermath of the strike by the Alitalia workforce on 19 January, and in rejection of the 2,700 redundancies envisaged by the 2004-6 industrial plan, the trade unions issued a joint plan for the company’s recovery. The plan rejected the company management’s logic of outsourcing and turning Alitalia into a company, proposing instead that:
- shareholdings in Alitalia should be made available to organisations operating in the tourism sector, such as tour operators and the state railways, and to local authorities and regional governments;
- the EUR 360 million set aside by the government to support the company’s previous industrial plan, which the unions rejected, should be taken up;
- Rome’s Fiumicino airport should be reorganized as Italy’s central hub, but without detriment to Milan’s Malpensa airport, which should be developed as a European-scale logistical platform for cargo;
- the Alitalia fleet should be developed in the medium term by replacing its Md80 medium-range aircraft with the 319/320 Airbus, while the present number of long-haul aircraft should be doubled, also by leasing Boeing 767s; and
- costs should be cut by carefully appraising the company’s consultancies, subcontracts and publications, as well as by reducing the size of the board of directors and by adjusting the salaries of senior executives to the average levels paid in publicly-owned enterprises.
Company’s new industrial plan
The deterioration of relations between the unions and management led, on 27 February 2004, to the resignation of the Alitalia managing director, Francesco Mengozzi, the chief architect of the former industrial plan rejected by the unions and which the government (the majority shareholder in the company) also found unsatisfactory. The new chief executive, Marco Zanuchelli (previously director general), resumed talks with the unions, and together with them revised the industrial restructuring plan. The latter, 'whose main goal should be the compatible development of Alitalia together with its necessary recovery', now envisages:
- recovering the company’s domestic market share through commercial alliances and the takeover of national companies;
- increasing the long-haul fleet to give it greater weight in intercontinental business by purchasing new aircraft (Boeing 777s), opening new routes, and increasing the frequency of flights (in particular between Rome and New York);
- consolidating international alliances and updating the agreement with Air France, so that an accord on the Italian provinces and France and among hubs could be revised without affecting the commercial alliance;
- increasing productivity by greater workforce flexiblity and inter-company mobility;
- cushioning redundancies (IT0311306T) by means of a diversified approach - using the extraordinary Wages Guarantee Fund (cassa integrazione straordinaria, Cigs), availability list s (liste di mobilità), job-security agreements (contratti di solidarietà) and to a lesser extent voluntary redundancies; and
- requesting the government to provide a package of measures to support the entire air transport sector (eg reduced taxation on fuel).
Government’s proposal
With regard to the new industrial plan, as agreed by the company and unions, the government has promised to issue a decree on 'system requirements' (although its approval, scheduled for 14 April 2004, was postponed by the cabinet) involving a series of legislative measures to support the entire air transport sector (given that a decree in favour of Alitalia alone would be rejected by the EU Commission as constituting state aid).
The draft of the decree comprises interventions with total running costs of EUR 200 million, while for 2004 the sum would amount to EUR 120 million. The plan envisages:
- income support measures for 2,000-2,500 employees in the sector - of whom 1,500 are Alitalia employees - taking the form of placement on the Wages Guarantee Fund, short-term mobility and training; and
- tax relief on fuel, and a reduction in the take-off, fly-over and landing fees paid by airline companies.
Reactions
The new industrial plan proposed by the Alitalia management is no longer centred solely on job cuts. It also aims at revitalising Alitalia and restoring its share of the market, and has been welcomed by the unions. The secretary of the Union of Italian Workers (Unione Italiana del Lavoro, Uil), Luigi Angelotti, stated that the recovery of Alitalia 'cannot be achieved by means of cuts, but by injecting new resources into the company and increasing its turnover'.
The failure of the cabinet so far to approve the decree to support the air transport sector has aroused harsh criticisms from trade unions at Alitalia, which have called for urgent talks with the Prime Minister while warning 'in the absence of a clear, certain and shared proposals, a tough response will inevitably follow, which given the high stakes may profoundly disrupt the air industry'. Moreover, the unions have confirmed their willingness to 'identify fair strategies for organisational efficiency, but only if combined with intervention in the system requirements'[set out in the decree] 'and a concerted industrial plan which protects workers, and is therefore strongly oriented to development, and safeguards the company as a whole'.
The government’s plan has angered the large European airline companies, led by Lufthansa and British Airways, which have declared their opposition to public aid for their rival Alitalia and are ready to appeal to the European Commission.
Commentary
The Alitalia crisis has been aggravated by two factors. The first is a lack of a clear corporate strategy to relaunch the company. Excessively vague as to concrete measures with which to revitalise the company, the management’s new plan seems more oriented to waiting for government aid than to presenting a credible industrial project. The second factor responsible for the crisis is the divisions within the government (the main shareholder in Alitalia) regarding the measures to be taken. These divisions, which have characterised the behaviour of the cabinet throughout the Alitalia crisis, have provoked a fierce political clash which has led to failure to privatise the company (as proposed by some parties in the government majority) but also to postponement of action on the 'social shock absorber' measures to support employees during restructuring.
The delay with which the company and the government have tackled the crisis, and the clash with the trade unions (which has only recently subsided), have not only harmed industrial relations (all the more important in a publicly-owned company like Alitalia) but worsened the company’s financial results. At the same time, the risk of redundancies and heavy cuts in staff levels has not diminished.
In such a difficult situation, in the absence of a serious project for industrial recovery, ad hoc intervention by the government to extend the extraordinary Wages Guarantee Fund to air transport workers may prove inadequate. The Cigs is a social shock absorber (IT0311306T), that is an income support fund for industrial firms with more than 15 workers. It can be extended to the services sector (to which air transport belongs) only by a especial law (probably an emergency government decree). Moreover, use of the fund requires the relevant financial coverage, which may vary according to the workers involved and the duration of its application (from a minimum of two years to a maximum of four). (Livio Mutatore, Ires Lombardia)