Alitalia Board Approved 2002-2003 Plan

The Alitalia Board of Directors met today and approved the document relating to the Two-Year Plan 2002-2003 which outlines the new market scenario and the consequent effects on the Group`s prospects which might come about over the next two years, as a result of the September 11 events, in the hope that the present air transport crisis will be over by late 2003.

In spite of the forecast for the coming two years and the predicted sharp drop in demand (of the order of 17% on average in 2002 and of 4% in 2003, compared to 2001 levels prior to the September 11 crisis), the aim of the measures and the actions set out in the document is to reach par for the Group by the end of 2003 (net profit of 25 million euros), within a sustainable financial framework in the medium-term, of a nature that would ensure that the Company retains its potential as a global carrier.

It should be emphasised that the achievement of these objectives presupposes the implementation of certain steps (compatible with European regulations) that are still under discussion at government level, without which it will be impossible to balance the 2003 budget, unless a total change were to take place in the present strategic positioning of the Company - a change of such a nature that might prevent the Company from returning to its path of development, and might lower its potential as a global carrier.

In particular, reference is made to:
* the payment of the second and third instalments of the previous increase in share capital (380 million euros, equivalent to 750 billion lire), together with shareholder participation and raising capital by other means (of the order of 1,200-1,400 million euros in a manner to be decided) to be carried out during the first half of 2002;

* government support for the air transport sector which Alitalia and other airlines operating in Italy will receive during the two-year period.
In brief, the Two-Year Plan 2002-2003, which includes the above measures, envisages:
* steps to rationalise the network and the fleet, which will be in line with those already set out in the Contingency Plan; such steps will be taken within the framework of the strategic objectives of the redesigned network contained in the Business Plan 2002-2006, and will focus on achieving quality products and services;


* a level of redundancies similar to that shown in the Contingency Plan (2,500 jobs), as well as early retirement with incentives for a further 900 people who have reached (or who are about to reach) pensionable age, in order to help towards structural efficiency without going against current employment regulations;

* investments in the fleet of the order of 1,500 million euros, required to continue the modernising process, and to reduce the quantity of aircraft types, as well as the seating capacity of single planes - steps which are aimed at making fleet utilisation more efficient;

* acceleration of the policies for selling off and/or setting up partnerships in sectors relating to non-core activities, and for transferring the ownership of the Rome/Magliana office complex (planned for 2002);

* a proposal for the setting up of a special fund during the current year (of the order of about 250 million euros to be added to the forecast loss estimated at 350 million euros) which will be used not only for the above-mentioned early retirements with incentives, but also against the likely devaluation of the aircraft which are to be taken out of the fleet as part of the rationalisation process, should the present crisis in the air transport sector persist;

* full-scale activation of the “levers” provided by strategic alliances.

The Chief Executive Officer received the Board`s mandate to transmit the Two-Year Plan to the shareholders and to the government authorities. Any other rumours in the press concerning the contents of the Two-Year Plan should be regarded as spurious and wholly without foundation.