Air France board back move on Alitalia
By Kevin Done in London and Guy Dinmore in Rome
Published: March 10 2008 21:34 | Last updated: March 10 2008 21:34
The board of Air France-KLM, the leading European airline, on Monday gave its backing for the group to submit on Friday a takeover bid for Alitalia, the lossmaking state-dominated carrier.
Air France-KLM was due to decide by the end of the week on making a binding offer for the Italian airline, but it said on Monday the offer would still be subject to some conditions, most importantly on the deal receiving the backing of the trade unions.
EDITOR’S CHOICE
Berlusconi comments put Alitalia sale in doubt - Mar-05Alitalia in court setback over Volare takeover - Mar-03Milan airport changes spur Alitalia criticism - Feb-07Alitalia cuts flights out of Milan - Feb-05Pressure builds to review Alitalia sale - Jan-30Rome supports Air France bid for Alitalia - Dec-28Air France has taken a pioneering role in the consolidation of the European airline industry following its takeover of KLM, the Dutch national airline, in 2004, the first takeover of a flag carrier in Europe.
Details of its offer, prepared after an eight-week due diligence investigation, are yet to be disclosed.
In its non-binding offer submitted in December, however, it said it would acquire 100 per cent of Alitalia’s shares through an exchange offer and would acquire 100 per cent of Alitalia’s convertible bonds.
Air France-KLM said it also planned to inject immediately at least €750m ($1.2bn) into Alitalia through a capital increase that would be fully underwritten by Air France-KLM.
The modernisation and then replacement of Alitalia’s ageing fleet would be a high priority for investment.
Otherwise, Air France-KLM has backed the existing Alitalia management’s latest rescue plans, which include a shrinking of the airline, the closure of lossmaking routes and a concentration of operations on the Rome hub with the elimination of hub activities in Milan Malpensa.
The unions, which number nearly a dozen and have in the past severely troubled Alitalia, are divided over the airline’s future.
They were first presented with an outline of the Air France-KLM business plan last week.
Although the unions are not happy with the proposal, they have not rejected it outright. The Filt-Cgil transport federation complained last night that the unions had not yet seen adequate information on the Air France-KLM offer and were concerned over large numbers of jobs, especially among ground staff and maintenance in Alitalia Servizi, the maintenance division which is part-owned by Alitalia.
“We do not want to be presented with a take-it-or-leave-it offer,” the federation told the Financial Times, noting that last week’s briefing by officials from both airlines was short on information and details. “We will examine the offer on its merits.”
Alitalia is losing some €1m a day and is more than €1.2bn in debt. Officials warn that the airline risks bankruptcy within months.
The non-binding offer first proposed by Air France-KLM in December comes in the form of a share swap that would give the Italian government, owner of 49.9 per cent of Alitalia, a stake of about 3 per cent in new enlarged group.
Copyright The Financial Times Limited 2008
