Alitalia`s Board Meeting

6th Mar 2003

At last week`s meeting of the Alitalia Board of Directors, the CEO Francesco Mengozzi gave an overview of the economic performance for the year 2002, after first commenting on inaccurate news reports which had appeared in the Press recently, based on Company working documents which were for internal use only. He then went on to say that the economic performance in 2002, compared to the previous year, showed a marked improvement in the business margin before financial commitments, and before taxes, devaluation and amortisation (EBITDA). The margin was substantially positive and broadly in line with the forecasts set out in the Business Plan, in spite of the fact that some of the main economic presuppositions had not come about.
The CEO also pointed out that the margin before financial commitments and taxes (EBIT) only, was still broadly aligned with the Business Plan and confirmed a net positive economic result (the Plan envisaged a loss of 53 €/million, and in 2001 a loss of 907 €/million was reported). This was obviously due in part to the contribution of extraordinary items linked not only to the question of KLM but also to divestments carried out in order to restructure the perimeter of the Group.
The CEO made it clear to the Board that the above result should be viewed within the framework of the Company’s overall financial asset structure which, in 2002, underwent a marked improvement settling at a level of about 1.7 €/billion compared with net indebtedness of 0.9 €/billion (without taking into account the arbitration penalty paid by KLM). An asset structure of this order is broadly in line with that of major European competitors.
He went on to say that this result does not diminish the problems relating to the new scenario in which the sector finds itself, nor can it be considered as a factor that reduces the drive towards full industrial re-launching - something that the Plan had envisaged for the two-year period 2002-03, against a backdrop of much more reassuring market forecasts.
In the light of this, and to limit the effect of the very sharp increases in external costs not directly managed by the Company (fuel, insurance, etc.), the programmes for reducing operative costs have recently been reviewed and updated with the aim of achieving significant savings in 2003 as well, in line with the forecasts set out in the Business Plan (i.e. a higher level than was reached in 2002).

The Board then gave a mandate to the CEO to conduct an in-depth feasibility study (with related ways and means) into the possibility of a strategic alliance with Meridiana by means of a negotiated period of exclusivity aimed at defining a joint business plan by April 15, 2003.
The Board then made a final deliberation regarding the withdrawal of the appeal for damages presented to the European High Court, in relation to the annulment of the European Commission’s decision on July 15, 1997, by the same High Court, with sentence handed down on December 12, 2000, and took note of the closure of the account deposited as a guarantee, set up according to law 640 of 1996. Regarding the consequences of this account closure, an enquiry has been started, working together with representatives from the Ministry for Infrastructures and Transport, in order to determine the outcome of this contested item.
Finally, the Board authorised the acquisition of the tenth B777 aircraft under a leasing contract, and confirmed the withdrawal of a B767 from the fleet at the same time.


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