(Repeats story published on Thursday)
* Italian carrier may cut up to about a sixth of workforce
* Could also ground 20 planes to cut unprofitable routes
* Controlling investor Etihad seeks to turn airline around
By Stanley Carvalho and Agnieszka Flak
ABU DHABI/MILAN, Nov 24 Alitalia could cut up to
2,000 jobs as controlling shareholder Etihad Airways pushes for
sweeping changes to turn the loss-making airline around,
according to sources close to the matter.
The Italian carrier may also ground at least 20 planes to
cut certain unprofitable routes on domestic and regional
services where it is struggling to compete with low-cost rivals
and high-speed trains, the sources told Reuters.
It is likely to remain loss-making for the next two to three
years even if it carries out the job cuts of around a sixth of
its workforce and the plane groundings, said one of the sources.
But a failure to slow the airline's decline and ultimately
reverse its fortunes would not only see Abu Dhabi state-owned
Etihad take further financial hits on its investment, but deal a
significant setback to its European expansion ambitions.
It would also represent a defeat for the Italian government,
which regards Alitalia as a strategic asset and a matter of
national pride, denting its industrial strategy aimed at
attracting foreign investment.
Yet Rome is in a tough position, as news of possible job
cuts at Italy's flag carrier come at a sensitive time - days
from a Dec. 4 referendum on constitutional reforms that Prime
Minister Matteo Renzi has staked his political future on.
Alitalia said the next phase of its industrial plan would be
presented to its board of directors and its staff soon and that
it would not comment on any speculation until then.
Etihad, which owns 49 percent of the carrier, declined to
Etihad invested 560 million euros ($591 million) in Alitalia
in 2014 as part of a wider 1.76 billion euro rescue deal,
seeking to expand its global reach with access to Europe's
fourth-largest travel market, and pledged to return the airline
to profitability by 2017.
Rome helped engineer the rescue, hailing it an example of
Italy's attractiveness for foreign investors.
But two years after the deal was signed, Alitalia is losing
half a million euros a day.
Alitalia management is now studying several options to boost
revenues and create an operator that can finally yield a profit.
No final decision has yet been taken, sources say.
The options include cutting between 700 and 2,000 jobs of
the airline's 12,700 workers, according to three sources. This
could put Etihad and Alitalia management on a collision course
with unions - which have gone on strike over cost cuts in the
past - as the busy Christmas travel season nears.
Alitalia is also considering grounding at least 20 planes,
mostly Airbus 320 aircraft, said two of the sources.
The airline is also trying to renegotiate the terms of an
alliance with Air France-KLM and U.S. carrier Delta
Air Lines to boost traffic on higher-margin
When Etihad took its 49 percent stake in the carrier, it
promised to slash costs, turn Rome's Fiumicino airport into an
intercontinental hub, improve the airline's cargo business and
add new long-haul connections from Rome and Milan, keen to
expand in Europe's fourth-largest travel market.
But the turnaround hit problems after low-cost airlines such
as Ryanair expanded more aggressively in Italy, putting
more pressure on Alitalia's domestic and regional services, and
after militants attacks across Europe dented passenger numbers.
Last month Etihad CEO James Hogan used an interview with
Italy's daily Corriere della Sera to vent his frustration about
unions who hamper his efforts by taking to the streets over cost
cuts and accused Rome of failing to support his turnaround plan.
The government responded by saying it had fulfilled all its
commitments towards Alitalia.
Alitalia needs money to invest in its long-haul business,
but its existing Italian shareholders are unwilling to pour in
any more cash.
The group of Italian shareholders, which control a combined
51 percent stake and include Italy's two biggest banks UniCredit
and Intesa Sanpaolo, have long ceased to take
an active interest in the airline.
One option discussed is the conversion of a bond into
semi-equity financial instruments without voting rights,
allowing Etihad to invest more without breaching the ownership
limit that ensures Alitalia retains its European status,
according to two sources.
However, whether Etihad is prepared to invest more is
"In the low oil price environment, it will be a big
challenge for Etihad to convince Abu Dhabi for more cash," said
one of the sources. "They've already pumped in a lot in Alitalia
and others. It is time to get some money back."
Etihad's first major investment in Europe - Air Berlin - has
also proven a struggle to turn around. Etihad is now in talks to
buy some of its tourism operations and combine those into a new
joint venture as part of a drastic restructuring that will see
Air Berlin's fleet halve in size.
Ultimately the options for Alitalia remain few and far
between, unless another cash-rich investor can be found or it
can be folded under a bigger and financially stronger European
player, industry sources and analysts have said.
Italian media suggested that German airline Lufthansa
could buy into Alitalia, but both airlines denied
"The low-cost carriers are getting stronger, Alitalia is
weak in Italy and Europe, is a tiny player in intercontinental
traffic and has little money to invest," said Andrea Giuricin, a
transport analyst at Milan's Bicocca university.
"Either Etihad finds a European solution to Alitalia or lets
it close up shop, although I doubt Rome would allow that."
($1 = 0.9469 euros)
(Additional reporting by Alberto Sisto in Rome, Paola Arosio in
Milan and Victoria Bryan in Berlin; Editing by Pravin Char)