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Faced with the crisis in the world aviation industry, the Italian national airline, Alitalia, announced a major restructuring plan in November 2001, including large-scale workforce reductions. An agreement on the plan was reached between management, trade unions and the government in January 2001. Redundancies will mostly be avoided through early retirement and cuts in working time and pay, while the government will provide funding to relaunch Alitalia.
The terrorist attacks on the USA on 11 September 2001 have had major repercussions throughout the world aviation industry, which is going through the worst period in its history. This is the conclusion of a study carried out by the International Labour Organisation, published on 18 January 2002, which considers the present crisis to be twice as serious as the effects of the Gulf War on the airline business. The study states that for every job lost in airlines, four jobs are lost in airport-related services (restaurants, maintenance, security, baggage handling etc) and three jobs outside airports (in hotels, transportation etc).
The crisis has led to thousands of job losses: since September 2001, US carriers have cut 100,000 jobs, and European airlines have shed more than 40,000 employees.
The number of passengers carried by Italian airlines has fallen drastically on international and intercontinental flights since September 2001. The turnover of Italian airlines had risen in the second quarter (April-June) of 2001 by 8.2% over the same period in 2001, but the increase was just 1.7% in the third quarter (July-September). Currently, 7,000 jobs in the Italian airline industry are threatened, along with several thousand more in related services.
Crisis at Alitalia
Within this framework of crisis in civil aviation, the leading Italian airline, Alitalia, has been particularly badly hit. It currently has 24,000 employees, and its main shareholder is the Ministry of the Economy, with 53% of shares. Alitalia has a turnover of some EUR 5.371 billion and serves 60 countries, carrying an average of 25 million passengers per year. In mid-2001, Alitalia joined Skyteam, a partnership with other airlines (Aeromexico, Air France, Czech Airlines, Delta Airlines and Korean Air), after the failure of a merger with the Dutch KLM.
After the events of 11 September, Alitalia cut some routes, but this did not resolve its overall problems of overstaffing. In November 2001, the volume of passenger traffic was down 31.3% compared with the same month in 2000, while the company cut the number of available seats by 20.4% over the same period. Intercontinental flights were the worst hit. Along with cancellation of routes to Africa and Australia, traffic across the North Atlantic was reduced by 44.3%, against cuts in capacity of 31%.
In November 2001, the Alitalia board of directors drew up a two-year business plan covering 2002-3, which includes the launch of a bond issue and workforce reductions ((IT0111103N). The equivalent of around 3,400 jobs would be cut, although the company did not specify the exact number. Some of these job losses (apparently around 900) would be accounted for by early retirement programmes. For the remainder, the company would use so-called 'solidarity contracts ' (contratti di solidarietà ). This instrument, introduced by Law No. 223/1991, involves employees accepting a reduction of working time and a corresponding pay cut. The state makes up part of the lost wages so as to limit the impact on pay packets.
If the equivalent of 2,500 jobs are to be cut through solidarity contracts, the reduction in working hours and pay for each employee will be 10%. The greatest difficulties in introducing such a scheme will probably be related to identifying the functions for which the reduction in working time will be applicable, in terms of maintaining overall service efficiency. For example, pilots are unlikely to be affected for obvious reasons.
By law, the introduction of solidarity contracts must be agreed by the employer and trade unions: 45 days are set aside to reach an agreement. If they fail, the parties can apply to the Ministry of Employment for assistance. A further 30 days are set aside for this phase, which must include a detailed plan of how the contracts will be applied and to which specific functions.
However, commentators believed that solidarity contracts were not in themselves enough to solve the crisis at Alitalia, and that government aid was required to relaunch Alitalia's finances.
Trade union positions
The crisis in Alitalia and the wider aviation industry led to conflict in late 2001. A number of strikes were called in airlines, both to call for more decisive government action and in opposition to the Alitalia two-year plan and its proposed job losses. Strikes in the transport sector in 2001 were 17.5% up on the previous year, with 21% of the increase due to airline strikes.
According to the trade unions, the crisis affecting Italian civil aviation has very deep roots. Deregulation of the sector and of ground services was carried out without any planning, they claim, and the subsequent growth in the industry was 'without organisation and often in contradiction with real needs; without planning of infrastructure and with a jungle of carriers created overnight and disappearing equally quickly, with evident repercussions on employment'. The unions maintain that the events of 11 September were not the cause of the airline industry crisis but may be the final blow, creating irreparable damage to employment in the sector.
The trade unions called for direct government action for the entire airline industry and for Alitalia in particular, where the government is the majority shareholder. The unions asked the government to:
- declare a state of crisis in the industry in order to enable the Wages Guarantee Fund (Cassa integrazione guadagni, Cig), which cushions the effects of redundancies and restructuring in some sectors (IT9802319F), to be used. As a service sector company, Alitalia does not normally have recourse to the 'social shock absorbers', such as the Cig, which are available to companies in industry, for example. The use of all the available instruments to reduce the social and economic impact of job losses would enable the crisis to be managed more calmly, stated the unions; and
- draw up a national airports plan for airport infrastructure.
The unions did not agree with the management proposals to deal with the crisis at Alitalia. In their opinion, these proposals were based entirely on refinancing the company and 'downsizing', while the company needed to be relaunched. The company needs at least a four-year plan (covering 2002-6) to turn the corner, the unions claim. Their proposals for Alitalia were:
- 'strong recapitalisation' with investments which are able to maintain the competitiveness of the company. Capital could be obtained by the sale of shares owned by the state (with the state maintaining a 'golden share') and greater share-ownership by employees;
- identification of a management team able to manage the crisis and relaunch the company;
- more long-haul flights and the purchase of new airplanes; and
- maintenance of the two existing hubs at Malpensa (Milan) and Fiumicino (Rome) to support fleet growth.
All nine major trade unions representing aviation workers agreed on these principles. Andrea Tarroni, the chair of the National Association of Civil Aviation Pilots (Associazione Nazionale Piloti Aviazione Commerciale, Anpac), accused Alitalia of making commercial agreements only, without 'a proper business risk policy'. Ermenegildo Bonfanti, the federal secretary of the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl), believed that a policy based on the competitiveness of the company was essential, to reduce costs but 'in line with quality and safety standards'. Mr Bonfanti called on the government to act in its role as majority shareholder so that the company could 'overcome the current uncertainties which relegate air transport to a submissive role in Italy'.
Agreement reached
Aviation staff trade unions and professional associations were invited on 23 January 2002 to meet the Prime Minister, Silvio Berlusconi, and Ministers of the Economy, Transport, Employment and Community Policy, to review the situation of the airline industry and of Alitalia. The meeting was preceded by preliminary meetings on 21, 22 and 23 January between union representatives and the Ministry of Transport.
The meeting in the Prime Minister's office lasted over eight hours and produced an agreement, signed by all the trade unions and associations, except one. Alongside the government and Alitalia management, the signatories were: Filt-Cgil, the transport affiliate of the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil);Fit-Cisl, the transport affiliate of Cisl; Uilt-Uil, the transport affiliate of the Union of Italian Workers (Unione Italiana del Lavoro, Uil); the General Union of Labour (Unione Generale de Lavoro, Ugl); Anpac; the National Professional Association of Flight Attendants (Associazione Nazionale Professionale Assistenti di Volo, Anpav); the Pilots' Union (Unione Piloti, Up); the Northern Trade Union (Sindacato Padano, Simpa); and the Association of Flight Technicians (Associazione Tecnici di Volo, Atv). The Unitary Union of Air Transport Workers (Sindacato Unitario Lavoratori Trasporto Aereo, Sulta) agreed on principle but wanted to consult its members before signing the deal.
Through the agreement, the government - as the company's main shareholder - approves the new Alitalia business plan, guaranteeing the financial resources to relaunch the company, including a request from the financial markets for over EUR 1.2 billion in the first two quarters of 2001. The plan also includes government aid of EUR 360 million by means yet to be agreed. Alitalia management and unions will discuss the plan and, with the help of appointed experts, make further proposals in the light of the changing financial market and economic situation.
In relation to measures protecting employment, the government has not declared a state of crisis, so the 'social shock absorbers' will not be available for Alitalia employees. Related industrial enterprises affected by job losses at Alitalia may, however, use these schemes.
Solidarity contracts will be used at Alitalia as announced. Trade union will agree on the related reduction of working hours and employment costs by 15 February 2001. The government has promised to use the resources for employment promotion made available by the state budget for 2002 (IT0110103N), plus reserve funds, to assist redundant employees.
Further meetings will take place between the parties at the Ministry of Transport in the near future to discuss the future of the airline industry and the airport system.
Commentary
The agreement reached by the aviation trade unions and professional associations, the management of Alitalia and the government is a kind of 'Italian miracle'. Amidst general satisfaction, unions expressed their relief that the company has not been sold off and that 2,500 jobs have been saved. The stock exchange reacted with a 4.44% increase in the value of Alitalia shares. The 'miracle' was made possible by the government's undertaking to provide EUR 1.4 billion to relaunch Alitalia, plus tax benefits for the sector (probably the reduction of VAT on air fares) and support for the earnings of employees on solidarity contracts. Another important part of the agreement, which reassured the unions, was the postponement of the privatisation of Alitalia (53% state-owned) until 2003.
The agreement has two areas of uncertainty. The first is related to what the European Commission will think of the plan. The Commission has ruled out action by individual governments to support airlines. Furthermore, the Italian government has still to settle outstanding issues relating to prior financial deals for Alitalia. Recently the EU authorities have asked what Alitalia intends to do with EUR 129 million of funds it will receive from the government as a result of recapitalisation in 1997. The Commission's decision will depend on how the government intends to provide the new capital.
The other area of uncertainty is how united the trade unions will be. Solidarity contracts have been accepted only by the unions affiliated to the three main confederations, and other unions and professional associations are less happy with the arrangement. Despite their relatively small memberships, these unions are powerful because strike action by them would paralyse the airline industry.
Some differences of opinion emerged just a few hours after the agreement was signed. The Anpac pilots' union has declared that it will not accept solidarity agreements, despite the fact that the company wants to lay off around 200 pilots. Other independent unions have voiced similar objections, particularly ground staff, who do not want to bear the brunt of the deal. With the risk of becoming unpopular, the confederal unions have openly come out in favour of solidarity contracts, saving 1,600 jobs and reducing redundancies to 900 voluntary early retirements. These contracts will reduce working hours by 20%, with a 10%-15% reduction in net salaries. The state will make up the difference. Overall, the agreement is positive, providing the basis of a relaunch of the airline industry and safeguarding employment. The success of the agreement will depend on the ability of both sides to create an atmosphere of constructive cooperation in industrial relations: but this really would be a miracle. (Domenico Paparella and Vilma Rinolfi, IRES)