US embassy cable - 03ROME5653

C O N F I D E N T I A L ROME 005653 
 
SIPDIS 
 
 
E.O. 12958: DECL: 12/18/2008 
TAGS: EAIR, ECON, ELAB, IT, FAA, AVIATION 
SUBJECT: ALITALIA IN TURMOIL: INITIAL PRIVATIZATION MOVES 
PROMPT WALKOUT, MASSIVE FLIGHT CANCELLATIONS 
 
CLASSIFIED BY: ECONOMIC COUNSELOR KATHLEEN REDDY FOR REASONS 1.5 (B) AN 
D (D) 

1. (C) SUMMARY: FROM DECEMBER 17 TO EARLY DECEMBER 18, 
ALITALIA WAS FORCED TO CANCEL 80 FLIGHTS OUT OF ROME'S 
FIUMICINO AIRPORT AS HUNDREDS OF EMPLOYEES SUDDENLY WALKED 
OFF THE JOB TO PROTEST LOOMING PRIVATIZATION MEASURES AND THE 
POSSIBILITY OF LAYOFFS.  ACCESS ROADS TO THE AIRPORT WERE 
BLOCKED AND NO IMMEDIATE END TO THE CHAOS IS SEEN, ACCORDING 
TO ITALIAN DAILY LA REPUBBLICA.  SINCE THE ANNOUNCEMENT OF 
ALITALIA'S PARTICIPATION IN THE KLM-AIR FRANCE MERGER AT THE 
END OF SEPTEMBER, ALITALIA HAS BEGUN A SCRAMBLE TO PRIVATIZE 
AND REFORM ITSELF TO ENTER INTO THE MERGER ON MORE SOLID 
FOOTING.  LABOR AND CONTRACT TENSIONS HAD LONG SIMMERED 
BENEATH THE SURFACE BEFORE THE DECEMBER 17 ERUPTION, SO THIS 
PROTEST DOES NOT COME AS A SURPRISE.  ALITALIA MAY HAVE 
PINNED ITS HOPES FOR SURVIVAL ON THE MERGER AND 
PRIVATIZATION, BUT THIS SUDDEN CRISIS BRINGS TO THE 
FOREGROUND THE FUNDAMENTAL QUESTION OF WHETHER THE COMPANY 
CAN TAKE THE PAINFUL STEPS NECESSARY TO EVEN PARTICIPATE AT 
ALL.  POST WILL FOLLOW THIS PROCESS AS IT UNFOLDS, AND WILL 
TRANSMIT A MORE COMPREHENSIVE CABLE PROFILING ALITALIA AT 
THIS CROSSROADS IN JANUARY.  END SUMMARY. 
 
INTERNAL MANAGEMENT DIVISIONS 
----------------------------- 
 
2. (C) THE DECEMBER 17 EVENTS CAME IN REACTION TO A RECENT 
RECONSTRUCTION PLAN RELEASED BY ALITALIA MANAGEMENT.  THE 
PLAN IS SEEN BY FORMER MANAGING DIRECTOR FRANCESCO MENGOZZI 
AS ESSENTIAL TO ALLOW THE COMPANY TO PROCEED WITH RAPID 
PRIVATIZATION AND, THEREFORE, ASSUME A POSITION OF MAXIMUM 
STRENGTH IN THE KLM-AIR FRANCE MERGER.  THE PLAN INVOLVES 
    CUTBACKS IN EMPLOYEE SALARIES AND BENEFITS AND INCLUDES THE 
POTENTIAL FOR LAYOFFS.  MENGOZZI'S APPROACH DIFFERS SLIGHTLY 
FROM THAT OF NEW CHAIRMAN GIUSEPPE BONOMI, A POLITICAL 
APPOINTEE TASKED WITH MOVING THE PRIVATIZATION PROCESS 
FORWARD.  PRESS REPORTS INDICATE THAT BONOMI - AND HIS 
SUPERIORS AT THE MINISTRY OF TRANSPORT - BELIEVE THAT NO 
EFFECTIVE PRIVATIZATION PLAN CAN MOVE FORWARD WITHOUT THE 
SUPPORT OF ALITALIA'S POWERFUL LABOR UNIONS. 
 
A FLIGHT ATTENDANT'S VIEW 
------------------------- 
 
3. (C) CHIEF AMONG THE DECEMBER 17 LABOR COMPLAINTS WERE 
MEASURES TO ELIMINATE A COST OF LIVING ADJUSTMENT FOR 2004, 
AND REDUCE BENEFITS BY RELYING MORE ON SHORT-TERM SERVICE 
CONTRACTS THAT USUALLY LAST FOR THREE OR FOUR MONTHS AND CAN 
BE CANCELLED EXPEDITIOUSLY.  FRANCESCO AVELARDI, AN ALITALIA 
FLIGHT ATTENDANT, HAS BEEN WORKING UNDER RENEWABLE SHORT-TERM 
SERVICE CONTRACTS FOR THREE AND A HALF YEARS.  "RIGHT NOW, I 
HAVE NO BENEFITS AND NO JOB SECURITY," AVELARDI TOLD ECONOFF. 
 AVELARDI WENT ON TO SAY THAT HE HOPES THAT AFTER FIVE YEARS 
OF TOTAL SERVICE, ALITALIA WILL PUT HIM ON A PERMANENT 
CONTRACT, BUT HE IS AWARE THAT THEY COULD DECIDE NOT TO RENEW 
HIS CONTRACT WHEN IT EXPIRES AGAIN IN FEBRUARY.  AVELARDI WAS 
RECENTLY TOLD THAT A HOLIDAY MORATORIUM HAD BEEN PLACED ON 
ALL WORK SCHEDULE QUERIES AND CHANGES UNTIL FURTHER NOTICE; 
AND AS A RESULT, HE IS UNABLE TO SPEND EITHER CHRISTMAS OR 
NEW YEAR'S WITH HIS FAMILY. 
 
COMMENT: AT A CROSSROADS 
------------------------ 

4. (C) THE VISIBLE AND DRAMATIC ERUPTION OF INTERNAL TENSIONS 
DECEMBER 17 WAS INEVITABLE.  A DEGREE OF URGENCY AND 
DESPERATION HAS SEEPED INTO THE CURRENT SITUATION, SINCE BOTH 
MANAGEMENT AND LABOR SEE INTERNAL REFORM AS A QUESTION OF 
SURVIVAL - MANAGEMENT, TO PRIVATIZE THE TROUBLED AIRLINE AND 
POSITION IT FOR ENTRY INTO THE KLM-AIR FRANCE MERGER; AND 
LABOR, TO PROTECT THOUSANDS OF ALITALIA EMPLOYEES.  WE EXPECT 
NO IMMEDIATE RESOLUTION TO THESE TENSIONS.  HOWEVER, ONE 
THING IS CERTAIN - THE WAY THESE TENSIONS PLAY OUT IN 2004 
WILL DETERMINE THE FATE OF A POTENT NATIONAL SYMBOL AND THE 
DOZENS OF SUPPORT SERVICES THAT CURRENTLY SUSTAIN IT. POST 
WILL FOLLOW WITH A MORE COMPREHENSIVE REPORT ON ALITALIA IN 
JANUARY.  END COMMENT. 
SEMBLER 
 
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	2003ROME05653 - Classification: CONFIDENTIAL