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Essay on Alitalia Airlines: Handling The Economic Crisis
Many airline companies are finding it difficult to make a profit. The International Air Transport Association says it expects the industry to lose up to four thousand million dollars this year. Yet air travel continues to increase. So what is the problem?
Fuel prices are high. But many airlines are finding that their way of doing business is also too costly.
The Italian airline Alitalia is close to seeking protection from its creditors. Alitalia has lost market share to companies like Ryan air of Ireland, which offer low-cost travel in Italy. (Ritter, 2004)
The Airline is facing heavy losses since last five years. Many steps have been taken to save the airline from bankruptcy In 2004 it was reported that "Alitalia, Italy's flagship carrier, could be facing financial collapse according to the company's chairman as quoted in Italian new reports of August 24, 2004.
Since the unification of the European union, and the deregulation of the European airline markets, Alitalia has suffered significant operating losses (their last operating profit was in 1998) and a decline in rider ship. Many low-cost airlines like Ryan air and Air One have gained significant market share in the Italian airline market.
In July, the European Commission approved an approx. $500 million dollar loan to the airline, to avoid bankruptcy, and to halt the potential loss of 30,000 total jobs.
Management claims that the company will collapse within 20 days without the loan and without a labor-restructuring plan that needs to be approved by the labor union. The two sides are expected to commence talks later this week.
A referendum is now taking place through Nov 10 regarding the restructuring plan that was recently approved by Alitalia trade unions and company management. The pilots, flight attendants, and other employees of the company must approve the plan....
