'Drastic action' needed in Alitalia turnaround

Reports that the country's flagship airline is about to announce up to 1,600 new redundancies have turned the spotlight on Etihad's de facto control of Alitalia, which was rescued from bankruptcy in 2014 by the Gulf carrier.

Economic Development minister Carlo Calenda, who met Etihad and Alitalia executives earlier this week, criticized them for airing the possibility of redundancies without first outlining a strategy to get the long-struggling company back on track.

"The situation at Alitalia tells us that the company has been poorly managed," Calenda told Radio Anch'io. "It is a totally private company that has significant organizational problems."

The minister went on to say that management mistakes should not "fall on the shoulders of the employees."

Alitalia's chairman, former Ferrari boss Luca Cordero di Montezemolo, said redundancies could not be ruled out.

"We need a drastic and courageous plan," he told reporters in Rome, playing down tensions with the government while also emphasizing that Alitalia had to address its high cost base relative to leaner low-cost rivals.

"What is important is that after so many years, we have to have the courage to change the business model," Montezemolo said.

He said a plan for the airline's future would be ready in two three weeks.

"The business plan will outline what has to be done to arrive at our objectives," he said.

"It may be that there will be redundancies, we will see and, on this, reach an agreement with the government, on the basis of a detailed plan."

Etihad announced last month that it was cutting staff across its businesses in response to intensified competition and a weaker global economy.

Nationalist ire

Alitalia unions welcomed Calenda's criticism of how the airline is run.

"We have been trying to point out for some time now that the solutions to this company's problems cannot come uniquely through cutting staff numbers and salaries," said Emilliano Fiorentino, the National Secretary of the Fit-Cisl union.

The fate of Alitalia in its partnership with Etihad has also become an issue for Italy's nationalists.

"Calenda has finally woken up and asked to seek Etihad's plans - we have been demanding for two years that the Arabs share their plans for the Italian company," said Jonny Crosio, a Senator for the far-right Northern League.

Etihad's 49-percent holding in Alitalia is one of a number of strategic stakes it holds in partner airlines around the world.

It owns 29 percent of Air Berlin, 40 percent of Air Seychelles, 19.9 percent of Virgin Australia, three percent of Irish carrier Aer Lingus and 24 percent of India's Jet Airways.

The company has expanded rapidly since its launch in 2003. It now operates a fleet of 125 planes and made net profit of $103 million last year on sales of just over $9 billion.

By Angus MacKinnon