ATW Daily News

'Complex and serious problems' exact heavy cost on Alitalia

Monday March 26, 2007

A year "marked by increasingly complex and serious problems" ended with a stunning €405.2 million ($541.7 million) pre-tax loss for Alitalia, which nevertheless promised that it possesses sufficient cash to cover operational and financial costs "for a period well in excess of 12 months."

The loss widened from a €144.2 million pre-tax deficit in 2005. It would have been larger had the board followed through on a plan to write down the value of the fleet by €400 million (ATWOnline, Feb. 23). It said it chose not to, "taking into consideration current events."

The board also said it would "freeze the most significant extraordinary transactions for the time being" as the sale of the company goes forward. The five remaining bidders are expected to submit nonbinding offers next month (ATWOnline, Feb. 14).

AZ blamed a 16% rise in fuel costs, its ability to cut operational costs by "only" €8 million, a 40% increase in low-cost carriers' presence in Italy and €100 million in lost revenue owing to labor difficulties for its troubling performance. Full-year operating revenue dropped 1.6% to €4.72 billion against a 2.9% increase in costs to €4.99 billion. The company said spinning off Alitalia Servizi accounted for most of the revenue drop. Operating loss expanded to €265.7 million from 2005's €47.5 million.

Fourth-quarter pre-tax loss of €129.8 million widened from a €36.7 million loss in the fourth quarter of 2005. Revenue remained level at €1.23 billion, operating costs rose 6.8% to €1.32 billion and operating loss soared to €92.5 million from €8 million.

by Brian Straus

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