Alitalia restructures to keep flying

March 29, 2002 Posted: 9:16 AM EST

Italy's national airline Alitalia plans to restructure to cut costs and reduce debt

ROME, Italy - Alitalia says it will raise up to 1.43 billion euros ($1.22 billion) and swap shares with Air France in an effort to restructure Italy's loss-making national airline.

Alitalia said half the money would come from the sale of new ordinary shares and half from the issue of convertible bonds. The Italian Treasury owns 53 percent of the airline.

The airline's board said the funding plan still must be approved by shareholders and will take place after Alitalia receives a final payment of 370 million euros from a previous government recapitalisation plan.

The board also said Alitalia would swap up to 3 percent of its shares for an equal amount of Air France shares.

The share swap had been rumoured for months, with some reports saying Air France would eventually take a 14 percent stake in Alitalia. However, it is believed the Treasury wanted to limit Air France's ownership to protect its majority role.

"We will appoint advisers to outline a technical timetable for the exchange of shareholdings of not more than 3 percent," the board said in a statement after approving its 2001 financial results.

Those results showed a net loss of 907 million euros last year, higher than the November forecasted loss of 673 million euros and the actual 2000 loss of 256 million euros.

Meanwhile, Alitalia has reportedly also reached a deal with its labour unions to reduce its payroll through cuts in working hours.

The payroll cuts -- along with the recaptialisation and share swap -- are part of the airline's restructuring plan announced last November. The plan also called for 2,500 job cuts, aircraft sales and reduced routes.

Like other airlines, Alitalia has been hurt by the global economic slowdown and a drop in passenger volume in the aftermath of the September 11 terrorist attacks in the United States.

Alitalia shares were quoted at 0.9424 euros on Thursday in Milan, with stock markets closed on Friday for the Easter holiday. The airline's shares have lost 40 percent of their value over the past year.

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