ROME, Sept 25 — Italian flag carrier Alitalia said on Tuesday it planned to cut one tenth of its workforce, reduce its fleet and stop flying several routes in order to stem losses following the attacks on the United States. THE STATE-CONTROLLED airline, which employs some 20,000 people, said it would lay off 2,500 workers, mothball or sell around 12 aircraft and freeze new plane orders in a drive to reduce expected second half losses.
The airline will also benefit from a Italian government aid package for its airlines worth a collective 300-400 billion lire ($140-$190 million), unveiled shortly after the cuts were announced.
Deputy Transport Minister Mario Tassone said the government aid would be directed at reducing airport taxes and VAT on tickets and to pay for increased security measures, meeting a request made by Alitalia last week.
Alitalia shares surged on the restructuring news, which introduces similar measures taken by most of the world’s airlines, and were up almost 17 percent at 0.77 euros before being suspended limit-up. The grave and immediate repercussions of the attacks on the U.S. at a global level have created a crisis in the civil aviation industry unprecedented since the Second World War,” Alitalia said in a statement on the plan. “In that context, and with the full backing of the government...the company has developed a contingency plan.”
The company said it would also suspend scheduled services to Hong Kong, Beijing and San Francisco, while reducing capacity on routes to New York.
Globally, more than 100,000 jobs have been lost in U.S. aviation and aerospace industries and thousands more at European airlines since the September 11 attacks on New York and Washington. U.S. lawmakers have approved a $15 billion package to help their airlines, but European finance ministers confined assistance for EU airlines at the weekend to providing stopgap war risk insurance to enable airlines to continue flying after commercial insurers withdrew such cover.

LOSSES BEHIND, LOSSES AHEAD
Alitalia said its cuts should help it contain losses in the six-month financial period from October 2001 to March 2002 to around 400 billion lire ($190 million) from a previous forecast loss of 700 billion lire.
Even prior to the latest downturn, it recorded a loss of 503 billion lire between January and June of this year.
“Technically about 70 percent of any airline’s costs are fixed and in a situation like this it’s those costs you’ve got to reduce,” said Chris Tarry, airline industry analyst at Commerzbank Securities in London.
“That means cutting jobs as well as other things... What we’re seeing from Alitalia so far follows the same line as other European carriers like KLM and British Airways,” he said. While the measures may help Alitalia trim its losses, some analysts suggested the share price bounce was excessive.
“I think this decision is very necessary since the airline has to restore profitability at the operating level. But the share price movement appears to be an overreaction,” said Andrea Attisani at Metzler Capital Markets in Milan.
“In comparison with its European peers, we still believe Alitalia is overvalued.”
Alitalia said it would shed some 900 flight staff and 1,600 ground staff. The planes it planned to sell or mothball included four Boeing Co 747s and six McDonnell Douglas MD-80s and MD82s.
Tarry at Commerzbank said airlines were operating in an increasingly difficult environment that could even challenge the tradition of national flag carriers, such as Alitalia, whose low market capitalization makes it a potential takeover target.
“We are going to see a different environment emerge which will likely be characterized by a smaller number of airlines.”

Michael SFO