EU rules Alitalia loan "illegal", approves privatization

European UnionRome/Brussels - A European Commission decision that an Italian state loan to Alitalia was "illegal," on Wednesday hit the ailing carrier as it was also attempting to deal with disruption caused by an ongoing wildcat strike.

Alitalia's bankruptcy commissioner, Augusto Fantozzi, said in an afternoon statement that the airline has mandated its lawyers to pursue legal action against striking employees.

These had caused "damages" to Alitalia's schedule and to that of its clients at airports Fiumicino in Rome and Linate in Milan, Fantozzi said.

By noon Wednesday, Alitalia had been forced to cancel 13 flights at Fiumicino, 17 at Linate and four at Milan's Malpensa hub, the airline said.

There was no immediate reaction from Alitalia to the European Commission demand that Alitalia will have to pay back a 300-million-euro (382-million-dollars) loan it received from the Italian government and deemed as "illegal state aid."

The so-called "bridge loan" was granted by the previous government of Prime Minister Romano Prodi on April 22 as a means to ensure its short-term survival amid falling passenger numbers and soaring debts.

The company, which is partly owned by the state, is currently being sold to a consortium of private investors called Compagnia Aerea Italiana (CAI).

The European Union's executive gave its conditional approval to the company's privatization process, insisting however that any asset sale should be done at "market prices."

"The commission considers that if the sale of assets is done at market prices, it will not involve state aid," said European Transport Commissioner Antonio Tajani.

Tajani said the commission would set up an independent trustee charged with ensuring that the sale follows EU rules.

The commissioner also noted that the 300-million-euro loan would have to be paid back by the old Alitalia, and not by the CAI consortium.

This, analysts say, is set to place the burden of the repayment on Italian taxpayers, since CAI made its bid to purchase the airline contingent on not having to shoulder the "old" Alitalia's debt.

"There is discontinuity between the old Alitalia and the new CAI," said Tajani, noting that the new, leaner carrier had agreed to employ 12,500 people, compared to today's
17,000.

Still, CAI is facing Alitalia employee dissatisfaction as was being borne out Wednesday by the wildcat strike which was on its second straight day.

Pilots, flight attendants and ground staff staged the strike to protest what they say is CAI's breach of employment terms it had agreed to when negotiating its privatization bid with the main labour unions.

Most of the unions however, are not supporting the stoppage, which Prime Minister Silvio Berlusconi's government has declared illegal.

Alitalia, which is facing debts of more then 1.2 billion euros (1.5 billion dollars), saw bookings decline by 30 per cent in September compared to the same period in 2007, according to Milan daily Corriere della Sera. (dpa)

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