Alitalia, which is discussing the possibility of buying a 49 per cent stake in Air Malta, is likely to take cost-cutting measures to be able to continue flying, according to a financial deal struck two days ago and reported in the Italian media.

The Italian government had to intervene to give Alitalia a 60-day lifeline through the financing of about €200 million in loans by two banks, which also have a stake in the air carrier.

Intesa San Paolo and Unicredit said they had agreed to grant Alitalia short-term financing on the condition that a new industrial plan was put in place by the end of February.

Alitalia’s CEO, Cramer Ball, who signed a memorandum of understanding with Air Malta last April, said that decisions on crucial cost-cutting measures would be made next month.

According to the Italian media, these are expected to include the reduction of Alitalia’s workforce by up to 2,000 employees – from the current 12,500 – and the possibility of disposing of up to 20 aircraft.

The measures will include cutting 2,000 Alitalia jobs

If such measures are put in place, creditors will discuss the possibility of extending to Alitalia another €400 million in loans to continue operating after February.

Two years ago, Etihad bought a 49 per cent stake in Alitalia with plans to turn the ailing Italian airline into a profit-making company by 2017. However, the opposite happened, with Alitalia now expected to register a loss of €400 million by the end of this year.

Airline industry sources told the Times of Malta yesterday that despite early signals, Alitalia should not be the preferred choice as a strategic partner for Air Malta if the government opted to continue insisting on striking a deal with the Italian airline at all costs.

“It has been obvious from the start of negotiations that although Air Malta needs a strategic partner to save it, this cannot be done by an airline which needs saving itself. There is absolutely no logic in this,” the sources said.

“The government keeps losing valuable time for Air Malta putting its financial situation in further peril,” they warned. The sources said that the prevailing situation is causing Air Malta significant problems because it was not in a position to negotiate certain contracts that were nearing there, end including multi-million euro deals on plane leasing.

According to last April’s memorandum of understanding, Air Malta and the government are precluded from negotiating with other strategic partners before terminating their dealings with Alitalia.

Tourism Minister Edward Zammit Lewis has been insisting, as recently as last week, that negotiations with the Italian airline were ongoing.

ivan.camilleri@timesofmalta.com