Alitalia has filed for Chapter 15 bankruptcy protection in the U.S., after being notified by New York JFK Airport that it would lose its lease for its gates at New York JFK effective today, June 13, if it didn't pay its overdue bills. Alitalia had also been notified that its phone and Internet service would terminate on June 20, for non-payment of bills.
Does This Mean Alitalia Will Continue to Operate?
For the time being, yes: Judge Sean Lane has issued a 10 day temporary restraining order that prevents Alitalia's creditors from taking any action that could hurt Alitalia's business before a June 26 hearing is held. That restraining order prevents Terminal One Group at JFK Airport from ending Alitalia's lease for its JFK gates, which are critical to Alitalia's revenue. At least 15% of Alitalia's global revenues come from its 9 daily flights between the U.S. and Italy, while Alitalia's flights to the U.S. provide 30% of its revenues.
Why is Alitalia Declaring Bankruptcy?
For years, Alitalia has been losing money, and this has been exacerbated by the rise of European Low Cost Carriers (LCCs). Alitalia’s market share in Italy was just 18% in 2015, down from 23% in 2007. Meanwhile, Ryanair currently has 23% market share in Italy, while EasyJet has 12%. And on Alitalia's critical NYC to Milan route, it's had competition from Emirates since the launch in 2013 of Emirates' New York to Milan fifth freedom flight.
Etihad had bought a 49% share of Alitalia in 2014, as part of its strategy of buying minority stakes in airlines to drive traffic to Etihad's hub, Abu Dhabi. But the increased competition of LCCs, coupled with Alitalia' high costs, and Alitalia's employees decisive rejection of a restructuring plan that would have cut salaries and jobs, meant that bankruptcy was inevitable.
Will Italy Nationalize Alitalia or Bail It Out?
Italy's government has said it will do neither: it wo't nationalize Alitalia, nor will it keep providing cash to the troubled carrier. It has agreed to provide EUR 600 million in emergency financing to keep it operating while Alitalia is engaged in restructuring its over $3 billion in debt.
So What's Next for Alitalia?
Alitalia has already filed for bankruptcy in Italy, where an administrator will develop a rescue plan within 180 days, which could be extended for another 90 days. This could involve asset sales, a consolidation of operations, and job cuts to make the airline viable again. Or, the administrator may decide that a restructuring isn't feasible and decree that the airline's assets are to be liquidated.
I Purchased an Alitalia Ticket from Delta; Is Delta Obligated to Get Me to My Destination if Alitalia Doesn't?
If you booked your Alitalia ticket as a Delta codeshare, yes, Delta would need to help get you to your destination; alternatively you can request a refund. Just keep in mind that Delta, as with other airlines, isn't obligated to get you to your destination by a certain day or time; it just has to put you on the next flight with availability in the class of service that you originally booked.
And on a flight from the U.S. to Europe, there is no EC 261/2004 protection; that only applies to European carriers flying to the EU, and to all carriers on flights departing the EU. See Airline Passenger Bill of Rights-What Are Flyers' Rights?
If I Purchased an Alitalia Ticket and Alitalia Doesn't Operate the Flight Due to Bankruptcy, Will I Receive a Refund?
I wouldn't count on a timely refund from Alitalia, but if you purchased your ticket with your Chase Sapphire Reserve, the Trip Cancellation insurance policy covers cancellation caused by the “financial insolvency of the…Travel Supplier whose services you booked.”
Time for a Backup Plan
If you have a paid Alitalia ticket for later this year, I'd recommend a backup plan, for example booking award flights that you can redeposit if it turns out your Alitalia flights are cancelled. Or, if your Alitalia ticket is an award ticket, I'd look at redeploying the miles for another airline.
Are you booked on Alitalia flights for later this year?
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