Alitalia’s financial woes have yet to impact the 10 or so bond offerings backed in part by aircraft the carrier has leased, but Kroll Bond Rating Agency is closely monitoring the situation.

The latest crisis came last week after workers voted against a turnaround plan that would have slashed costs by more than $1 billion while trimming about 1,000 jobs. Alitalia's management said the cuts were needed to stay solvent, and the company followed the move by declaring a form of bankruptcy (again) on Tuesday. 

The company’s shareholders voted unanimously to file for an extraordinary administration under an Italian law that is similar to U.S. Chapter 11 bankruptcy code protection. Under this law, an administrator will be appointed to determine whether the airline should reorganize or be liquidated for the benefit of creditors.

KBRA-rated aircraft ABS transactions have exposure to Alitalia include:  Aviation ABS Rating Methodology; Apollo Aviation Securitization Equity Trust 2016-2 (AASET 2016-2); ATLAS Series 2014-1; Blackbird Capital Aircraft Lease Securitization Limited 2016-1; Castlelake Aircraft Securitization Trust 2015-1; Castlelake Aircraft Securitization Trust 2016-1; DCAL Aviation Finance Limited; Diamond Head Aviation 2015 Limited; Eagle I Limited, Series 2014-1; and Emerald Aviation Finance Limited, Series 2013-1

Alitalia was the subject of a bail-out in 2014 by means of a significant capital injection from Etihad Airways, with goals of achieving profitability during 2017. However, increased competition on routes operated by U.K.-based carriers and significantly higher labor costs led to the ultimate failure of Etihad Airways’ profitability goals for Alitalia.

When labor unions rejected the restructuring plan, Etihad Airways signaled an unwillingness to invest additional capital into the company, prompting shareholders to greed to file for extraordinary administration proceedings on May 2, 2017.

“At this time, KBRA does not view Alitalia’s extraordinary administration filing as having an impact on the ratings of the securities related to KBRA-rated aircraft ABS transactions,” the rating agency stated in a press release published Friday. However, it is in “active dialogue with aircraft lessors and industry participants as the events relating to Alitalia’s possible reorganization continue to develop.”

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