MILAN (Reuters) - Alitalia finally secured the 300 million euros ($412 million) it needs to keep flying over Christmas, a source said on Tuesday, concluding a drawn-out capital raising that showed how much work the airline has to convince investors it can survive.
The cash call was part of a bigger government-engineered rescue to keep Alitalia going while it searches for a new partner willing to invest in revamping its fleet and making it profitable in the longer term.
The scale of that task was illustrated by the airline's difficulty in persuading shareholders to sign up for fresh investment - many aired doubts over its proposed business plan or wanted to see a tougher restructuring of the airline's debt.
The source said Italy's state-owned postal service, which had been lined up to commit up to 75 million euros for any unsubscribed shares, had to participate in the cash call in the end, although to what extent was not yet known.
"Including subscriptions by existing shareholders, new investors and the investment by the postal service, the 300 million euro target has been reached," the source said.
An Alitalia spokeswoman said the company would comment on the outcome of the capital increase in due course. The deadline to take up any unsubscribed rights in the cash call expires later on Tuesday.
Alitalia's management presented details of its revised industrial plan to trade unions on Tuesday, reassuring them that feared layoffs of thousands of people would not be part of its moves to return the airline to profitability.
Unions have vowed to gear up for a battle should any layoffs be announced. Any tough restructuring of the airline to suit a foreign investor would also weigh on the already fragile coalition government of Enrico Letta.
A union representative who took part in the meeting said Alitalia was targeting total cost savings of 295 million euros, with some 128 million to be obtained through salary cuts or by freezing pay increases.
"This whole plan focuses only on cuts, but does not present an industrial perspective for the company nor is there talk of a possible partner," said Guido Barcucci, a spokesman for the CGIL union. "In this form, this is a non-starter."
He said Alitalia proposed to postpone an earlier plan to increase its presence on more lucrative intercontinental routes. Boosting the number of long-haul flights has so far been seen as imperative to turn Alitalia's fortunes around.
"This is not the way to go. We need some guarantees that there is a future for this company," Barcucci said. Management and unions will meet again, although no date has been set yet.
The capital raising, later extended to new investors including Italian businessman Antonio Percassi, will likely allow Alitalia to keep flying throughout the key Christmas holiday season.
But with daily losses of around 700,000 euros and net debt of more than 800 million euros, the company could risk having to ground its fleet again within six months, analysts said, unless a strong partner is found.
"With this fresh capital, Alitalia's problems have been swept under the carpet for a few months, but by summer next year they will reappear," a Milan-based analyst said.
"Alitalia needs much more than 300 million euros to revamp its fleet so it can finally start making revenues. Three to four billion euros is more like it."
Top shareholder Air France-KLM , which has a 25 percent stake and had been seen as most likely to come to Alitalia's rescue, was one of several investors to snub the rights offer. The Franco-Dutch group said Alitalia's pledge to make severe cost cuts was not enough to save it without its creditors having to write off some of its debt.
Over the years, other major airlines including Lufthansa and British Airways have flirted with partnering the carrier, which offers access to Europe's fourth-largest travel market and flies 25 million passengers a year - but decided it was too much of a gamble.
On Tuesday, daily la Repubblica said Alitalia and Etihad Airways were in advanced talks on a possible investment by the Abu Dhabi-based airline. Etihad declined to comment.
Sources close to the matter have said in the past few weeks that Etihad had no interest in Alitalia.
Today's Alitalia is much leaner than the group that was rescued and privatised in 2008. It has a younger fleet, a lower cost base than that of Air France and has long since scrapped staff perks such as free flights and taxis.
But a focus on domestic and regional markets has left it vulnerable to competition from low-cost carriers and high-speed trains on the busy Milan-Rome route.
(Additional reporting by Praveen Menon in Dubai; Editing by Sophie Walker and David Holmes)