APPROVAL OF GROUP’S INTERMEDIATE REPORT FOR 31 MARCH 2008

 - Traffic revenues for the first quarter 2008 amounted to 954 million euros showing a reduction of 43 million (-4.3%) compared to the previous year mainly due to a downturn in passenger revenues caused by a reduction in capacity offered.

- Consolidated operating loss in the first quarter 2008 amounted to 161 million euros (also due to the low season which is always a feature of the Company’s first quarter) showing a worsening of 48 million compared to the previous year’s loss (of 113 million euros), mainly due to the sharp rise in fuel costs (62 million euros).

- Pre-tax result was negative by 215 million euros (also due to the low season which is always a feature of the Company’s first quarter) showing a worsening of 62 million euros compared to the previous year (which was 152 million euros), mainly due to the sharp rise in fuel costs (62 million euros).

- The level of the Group’s net equity on 31 March 2008 amounted to about 96 million euros (169 million for the parent company Alitalia), before taxes which should bear on the period (note that the Annual Report 2007 has not yet been approved by the Board of Directors).

- The Group’s workforce on 31 March 2008 was 10,952 people showing a decrease of 226 (-2.0%) compared to 31 March 2007.

- The Group’s operating fleet on 31 March 2008 consisted of 173 aircraft of which 145 for short/medium-haul and 28 for long-haul.

 

- FURTHER POSTPONEMENT IN APPOINTING DIRECTOR

- COMMUNICATION FROM MR BRUNI ERMOLLI

- EXAMINATION OF GUIDELINES FOR REVISING BUDGET 2008

- CHANGES TO CORPORATE EVENTS CALENDAR 2008

 

The Board of Directors of ALITALIA - Linee Aeree Italiane S.p.A. met today, chaired by Mr Aristide Police at the Company headquarters, and approved the intermediate business summary as of 31 March 2008 for the Alitalia Group.

Bearing in mind that the period in question is low season (leading to typically negative results), the first quarter 2008 was mainly influenced by several factors:

- the sharp increase in fuel costs

- a reduction in activities coupled with the effects of the new marketing strategy which focuses on improving route performance in terms of unit revenues (yield) rather than encouraging increases in traffic volumes.

- the continuing erosion of the Company’s commercial credibility with marked effect on sales growth.

- the reduction in traffic caused by the announcement of changes in the network (carried out on 30 March 2008).

Traffic revenues for the first quarter 2008 amounted to 954 million euros showing a reduction of 43 million (-4.3%) compared to the previous year, mainly due to a downturn in passenger revenues caused by a reduction in capacity offered.

The costs for materials and services (excluding fuel) amounted to 625 million euros, down by 36 million euros compared to 2007 mainly due to reduced activities, renegotiation of contracts with Alitalia Servizi, and favourable exchange rates.

Labour costs amounted to 204 million euros, up by a million euros compared to 2007 (+0.5%).

Fuel costs of 285 million euros showed an upswing of 62 million euros compared to the same period last year, due to the sharp increase in the average price of crude oil, partly offset by less flight activity and favourable exchange rates. The consolidated operating loss for the first quarter 2008 amounted to 161 million euros showing a worsening of 48 million euros compared to last year’s loss (of 113 million euros), mainly due to the sharp increase in fuel costs.

Pre-tax profits for the first quarter 2008 were negative by 215 million euros, down by 62 million euros compared to the previous year.

The level of the Group’s net equity on 31 March 2008 amounted to about 96 million euros (169 million for the parent company Alitalia), before taxes which should bear on the period (note that the Annual Report 2007 has not yet been approved by the Board of Directors). Regarding the financial year 2007, it should be noted that the main changes, with respect to the economic situation shown in the fourth quarter report 2007, regard the expected devaluation, referring to the balance sheet on 31 December 2007, of fleet aircraft for about 97 million euros, as well as tax commitments.

The net debt on 31 March 2008 amounted to 1,351 million euros showing a worsening of 191 million euros compared to 31 December 2007.

The Group’s workforce on 31 March 2008 was 10,952 people showing a decrease of 226 (-2.0% circa) compared to 31 March 2007.

The Group’s operating fleet on 31 March 2008 consisted of 173 aircraft of which 145 for short/medium-haul and 28 for long-haul (on 31 December 2007, the operating fleet consisted of 186 aircraft of which 157 for short/medium-haul and 29 for long-haul).

Regarding the evolution of traffic and the network in the passenger sector, during the first quarter 2008 there was an overall reduction in capacity offered of 5.2% (1,184 million tonne kilometres compared to 1,248 million in 2007) with the aim of improving route performance.

The overall reduction in the capacity offered was matched by a more than proportional traffic reduction, amounting to -10% (786 million tonne kilometres carried compared to 873 million in 2007).

In overall terms, the load factor reached 66.4%, down by 3.5 percentage points compared to the previous period. This traffic performance led to an upswing in unit revenue (yield) of 4.6%.

The absolute value of revenues from passenger traffic (including those relating to the subsidiary Volare) showed a downturn of 4.8% (from 825 to 785 million euros).

***

Regarding the forward looking statement, the failure to reach agreement regarding the partnership project with the Air France-KLM group has led to a situation of increased uncertainty about the Company’s future.

From a strictly financial viewpoint, Legislative Decree no. 80 of 23 April 2008 has now made available a considerable amount of liquidity and, from the point of view of business continuity, this shows that the Government itself is confident about the possibility of re-launching the Company.

Regarding the equity situation, however, it is important to reiterate the need for recapitalisation to be carried out as quickly as possible.

The strongly negative impact of uncertainty, together with continual erosion of the Company’s commercial credibility with marked repercussions on sales growth, the resulting critical aspects of implementing actions required by the budget and the deterioration of the market scenario, affected by continual and ever higher increases in fuel costs – all these factors lead to an equity situation which is no longer able to sustain the Company’s forecast operations.

Therefore, the Board of Directors, while evaluating the possibilities of resolving the above requirements, awaits the measures that the Government – as main shareholder – decides to take.

***

The Meeting further postponed the appointment of a director required to complete the Board’s composition, while waiting for the decisions that the Government – as main shareholder – intends to take.

***

The Board expressed its appreciation for the communication from Mr Bruno Ermolli and awaits a clear statement of intent which proves to be in line with the above indications in order to agree to the requested due diligence.

***

The Board then took note of the guidelines for revising the budget 2008, reserving the right to carry out in-depth examination of measures for improving efficiency, in relation to the above-mentioned deliberations to be taken by the Government as main shareholder.

 

The Board also decided to change the date of the meeting to discuss the draft balance sheet, closed on 31 December 2007, and the consolidated report on the same date, setting the meeting for May 26 instead of May 23.

***

Alitalia announces that an English version of the results as of 31 March 2008 will be available on the Company website today.

This presentation shows the main economic and operational variables for the Group as illustrated in this press release and in the intermediate report approved today by the Board of Directors.

The Manager Mandated to draft corporate accounting documents of Alitalia – Linee Aeree Italiane S.p.A, dott. Vittorio Mazza, attests – as per art. 154-bis, comma 2 of the Testo Unico della Finanza (D. Lgs. 58/1998) – that the accounting information contained in this press release corresponds to the documented results, books and accounting registers of the Company.

 

Rome, 13 May 2008

For more information, please contact:

Simone Cantagallo
Head of Media Relations
Telephone: 06-65627431
Email: cantagallo.simone@alitalia.it
Company website: www.alitalia.com