Alitalia has been a perennial basket case. Their costs are high and their operations inefficient. And their ability to expand across the Atlantic in an advantageous way is, they say, hamstrung by a revenue-sharing joint venture agreement with Air France and Delta that’s a legacy from when Air France was a major investor in the airline.
Air France lit money on fire with Alitalia before walking away and letting Etihad pick up the pieces. Now the Abu Dhabi financing spigot has turned off, and they’ve filed for bankruptcy in Europe.
Copyright: jvdwolf / 123RF Stock Photo
They’ve also now filed for bankruptcy in the U.S. because they were days away from:
- Getting kicked out of New York JFK over unpaid bills
- Having their US phones and internet turned off
Alitalia sought chapter 15 protection, the section of the bankruptcy code that deals with international insolvencies, at the U.S. Bankruptcy Court in New York.
Large foreign companies, particularly those with U.S. operations or dollar-denominated debt, often seek bankruptcy protection in the U.S. to aid restructuring processes in their home countries. Like chapter 11, chapter 15 immediately halts lawsuits and blocks creditors from seizing assets.
The Italian government is apparently providing $673 million in emergency financing, however the carrier has debts of more than $3 billion and loses significant money every day. This government facility, however, wasn’t allowing them to pay their bills in the U.S.
The U.S. bankruptcy judge has issued a 10 day temporary restraining order to prevent any creditor from taking action which would harm Alitalia’s business. They were expected to be kicked out of New York JFK as soon as today, a huge blow considering that 15% of the airline’s revenue comes from their New York flights (and 30% from US flying). Their telephone and internet services faced cut off “early next week, which would have shut down its U.S. call center and other office activities.”
A hearing will be held June 26th. Don’t expect a refund of overcharged taxes on award tickets and of course I the airline ousting its CEO.
(HT: Wandering Aramean)
So, after those 10 days Alitalia will be kicked out of the US? Why would US airports provide gate access and services if they don’t get paid? Can a judge force airports to provide “Free Lunches” to Alitalia??
“The Italian government is apparently providing $673 million in emergency financing”
Where are the US and (other) European carriers with their anti-government bailout screams over this?
@gwayrav – Delta has a revenue-sharing joint venture with Alitalia so it’s to their BENEFIT. Of course they won’t complain. Just like Delta doesn’t complain about China Eastern subsidies, China Eastern is the most subsidized Chinese airline but Delta owns a stake in them, so…
Italian Government is lending this money to Alitalia at 10% interest rate
Doesn’t matter what the interest rate is – the government can say bye bye to the money.
I have an Alitalia r/t ticket bought directly from Alitalia via their website for travel early August. I paid for it using a CSR credit card. It is for departure from JFK. Will Chase cover my loss shut the airline shut down?
I don’t think the airline will shut down, and if they pare back routes I think you can be confident that JFK-FCO will continue.
Last time they were in trouble, no more than 3 years ago, they did the same and FCO-JFK was never stopped