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2 more airlines are victims of high fuel costs

Italy's Alitalia files for bankruptcy protection and Canada's Zoom ceases flying, stranding thousands of travelers.

August 30, 2008|From Times Wire Services

The airline industry suffered two more casualties Friday as Italian airline Alitalia filed for bankruptcy protection and Canadian carrier Zoom went belly up, stranding at least 4,500 travelers.

The debt-laden Italian national airline said its board had asked the government to appoint an administrator and had declared insolvency to a Rome court.

Alitalia has been losing about $3 million a day, hurt by labor unrest, competition from budget airlines and high fuel prices. Its shares have been suspended from trading since June.

The airline said its net debt at the end of July amounted to $1.73 billion. The figure does not include a $442-million loan that the Italian government granted in April to keep the cash-strapped carrier flying.

After Alitalia's announcement, the government named Augusto Fantozzi, a tax law expert and former finance minister, as the firm's administrator.

The government and others involved have been secretive about the negotiations to save the state-run carrier, but the plan reportedly calls for the breakup of Alitalia into two parts.

The profitable assets would be taken over by a group of Italian investors ready to inject $1.5 billion into the airline under the reported plan. The other assets would be spun off into a separate company for liquidation.

The plan is the latest attempt by the government to sell its 49.9% stake in the airline after a failed takeover bid by Air France-KLM this year.

Transatlantic carrier Zoom Airlines, which ceased flying Thursday, has left at least 4,500 travelers stuck abroad and an additional 60,000 holding tickets that can't be used, Britain's aviation regulator said Friday.

Passengers left stranded after planes were grounded will need to book with other carriers to return home, the Civil Aviation Authority said.

Slowing economies and a $50-million increase in fuel costs in the last 12 months led Zoom to join the two dozen carriers that have stopped flying or filed for bankruptcy protection this year.

Customers who booked directly with the company, which is based in Ottawa, Canada, and at London's Gatwick Airport, might lose their money unless they used a credit card or are covered by an insurance policy, the Civil Aviation Authority said.

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