Alitalia Considers Ways to Stay Viable
By MATTHEW WALTER and OSCAR BODINI
NEW YORK—The chief executive of Alitalia said the Italian airline could sacrifice its independence to remain a viable carrier.
"The market is consolidating, and I think there is a case for Alitalia to move into a larger group," Andrea Ragnetti said at an event in New York on Monday. He said the closely held airline hadn't decided whether to keep flying alone or become part of a bigger airline as it tries to improve profit.
His comments came as Alitalia shareholders meeting in Milan agreed to lend the airline €150 million, ($200 million), according to a person who attended the meeting. The loan would be made by the company's larger shareholders who weren't in financial difficulties, the person said.
French-Dutch airline Air France-KLM SA AF.FR -1.27% is Alitalia's largest single shareholder, with a 25% stake. The rest is owned by some of Italy's best known financial institutions and companies, which together mounted a €1.1 billion rescue of the carrier in 2008, including bank Intesa Sanpaolo SpA ISP.MI -1.50% and tire maker Pirelli PC.MI +0.11% & Co.
Alitalia declined to comment, and Mr. Ragnetti didn't discuss the funding options under consideration.
Air France-KLM declined to comment. Chief Executive Alexandre de Juniac has said the airline didn't have the means to consider increasing its stake in Alitalia. The French-Dutch airline bought its stake in Alitalia for €323 million. Since last month, when a lockup expired, Air France-KLM has had an option to buy additional shares.
Alitalia faces the same troubles that have hurt many other European carriers including high fuel prices and the region's lingering economic problems.
Carriers such as Air France have reorganized their operations, often through cutting thousands of jobs and renegotiating labor contracts. Such discussions are under way at Deutsche Lufthansa AG, LHA.XE -0.71% Nordic carrier SAS SAS.SK -3.42% A/B and Spain's Iberia, which is owned by International Consolidated Airlines Group IAG.MC -2.13% SA. Such airlines are struggling to run short- and medium-distance networks that compete profitably with discount carriers such as Ryanair Holdings RYA.DB -1.31% PLC, which run leaner operations.
"Alitalia will have to find its way in the next couple of years," Mr. Ragnetti said, adding that the airline's future was in the hands of its shareholders.
The U.S. airline industry has stabilized after mergers significantly reduced the number of players in the market, but Europe has been slower to do the same, Mr. Ragnetti said in a speech Monday. His comments came at the Italian Business & Investment Initiative, which is intended to promote investment in Italy.
Mr. Ragnetti didn't identify possible partners for Alitalia. Italian newspapers have speculated that Aeroflot-Russian Airlines OJSC could be a suitable partner.
The speculation came despite signs of improvement in Alitalia's finances.
Alitalia reported a third-quarter net profit of €27 million on a 4% rise in revenue to €1.13 billion. That followed losses in the previous two quarters. Net debt rose to €923 million in the third quarter from €862 million in the previous quarter.
Mr. Ragnetti said the airline's focus was to increase revenue rather than cut costs. Alitalia already had "one of the most competitive cost structures in Europe," he said. "The key will be to grow revenue and keep that cost structure unchanged."
Alitalia had a good fourth quarter and should break even, he said. "The company has shown to be much more resilient to the economic crisis," Mr. Ragnetti said.
