Job cuts to keep Alitalia flying

AN 11th-hour deal struck today looks likely to save struggling Italian national airline Alitalia. Unions and management have agreed on pay-offs for 3,700 employees - one sixth of the payroll - who are losing their jobs under a restructuring deal to save the airline from bankruptcy.

Although one of nine unions involved in the talks is said to be holding out, the other major labour groups represented have agreed terms.

Those laid off will get two years of welfare payments while staying on the firm's books for two years. They will then get three years of redundancy payments at a lower level.

In addition, the agreement brokered in the early hours opens the way to a €400m (£276.5m) emergency government loan package to help keep the airline flying.

It will also help fund a restructuring plan which will see €1bn slashed from costs and the division of the firm into two parts. One, handling the flight operations will be dubbed AZ Fly, while the other ground services business will be called AZ Service.

The Alitalia board headed by chairman and chief executive Giancarlo Cimoli is set to convene later today to approve the plan and half-year results.

But even as the rescue package was being assembled, Europe's low-budget airlines moved to challenge it.

A group of them has written to the European Commission arguing the terms of the the Alitalia debt restructuring-amount to illegal state aid.

The 11-strong European Low Fares Airlines Association (ELFAA), which includes Ryanair, has complained that the shift of Alitalia's existing €1.6bn debt is tantamount to illegal subsidies.

British Airways and several other airlines have also raised concerns about the plan agreed to save Alitalia.