Put up or shut up for Air One in Alitalia dogfight
By Paul Betts
Published: February 4 2008 18:19 | Last updated: February 4 2008 18:19
Tommaso Padoa-Schioppa has probably been spending more time lately trying to resolve the crisis at Alitalia than sorting out the problems of the Italian budget.
Under the circumstances, it is not surprising that he is continuing to battle for the sale of his country’s troubled flag carrier to Europe’s largest airline – Air France-KLM.
But the crusade of the former central banker and now caretaker Treasury minister is increasingly looking like a triumph of hope over reality.
Just before the recent fall of the Prodi government, he chose the Franco-Dutch group as the preferred bidder for the state’s 49.9 per cent stake in Alitalia. Air France-KLM has since entered exclusive negotiations with the Alitalia management, which also supports the Franco-Dutch takeover solution. So do a lot of industry analysts, who regard Air France-KLM as the best option for reviving the chronically lossmaking Italian carrier.
But the odds are now stacked against Mr Padoa-Schioppa. First, does a caretaker government have the authority to privatise such a politically sensitive asset as a national airline? If it did, what would be the reaction of the new government, especially if it were to be led by rightwing opposition leader Silvio Berlusconi, tipped to win an early election in the spring? The new government might be tempted to unravel the merger, or perhaps undermine it by slapping a 2 per cent voting cap on the airline’s new foreign owners, as an earlier Berlusconi government did when France’s EDF acquired a large stake in Edison, Italy’s second-largest power utility. This notwithstanding President Nicolas Sarkozy’s new Italian wife.
Second, the caretaker administration is also facing a race against the clock to clinch the Air France-KLM deal before elections are held. Air One, the small, privately owned Italian airline that has also been seeking to acquire Alitalia, has launched a legal challenge against Rome’s decision to give Air France-KLM exclusive rights to negotiate a merger. This is clearly a delaying tactic to help it gather more support to mount a counter bid.
Air One is already backed by one of the country’s biggest banks – San Paolo Intesa. Some heavy hitters of global finance – Goldman Sachs, Nomura and Morgan Stanley – also seem to have joined its camp.
The balance now seems to be tilting towards Air One, for all the caretaker government’s commitment to push through the Air France-KLM deal. The problem is that something needs to be done quickly. Alitalia is continuing to bleed and is being forced to sell precious assets – some of its London Heathrow slots for example – to stay afloat. Unless a solution is found, the airline by its own admission will run out of cash by the summer.
Air France-KLM insists it is still committed to negotiate a takeover. But such a deal has never been a make or break transaction for the Franco-Dutch carrier. It could happily live without it. So Air One’s Carlo Toto has a great opportunity to come up with a credible alternative to salvage the flag carrier. He must do so swiftly. If he does not, his own credibility will be questioned and Alitalia will simply glide a little closer to the grave.
Copyright The Financial Times Limited 2008
By Paul Betts
Published: February 4 2008 18:19 | Last updated: February 4 2008 18:19
Tommaso Padoa-Schioppa has probably been spending more time lately trying to resolve the crisis at Alitalia than sorting out the problems of the Italian budget.
Under the circumstances, it is not surprising that he is continuing to battle for the sale of his country’s troubled flag carrier to Europe’s largest airline – Air France-KLM.
But the crusade of the former central banker and now caretaker Treasury minister is increasingly looking like a triumph of hope over reality.
Just before the recent fall of the Prodi government, he chose the Franco-Dutch group as the preferred bidder for the state’s 49.9 per cent stake in Alitalia. Air France-KLM has since entered exclusive negotiations with the Alitalia management, which also supports the Franco-Dutch takeover solution. So do a lot of industry analysts, who regard Air France-KLM as the best option for reviving the chronically lossmaking Italian carrier.
But the odds are now stacked against Mr Padoa-Schioppa. First, does a caretaker government have the authority to privatise such a politically sensitive asset as a national airline? If it did, what would be the reaction of the new government, especially if it were to be led by rightwing opposition leader Silvio Berlusconi, tipped to win an early election in the spring? The new government might be tempted to unravel the merger, or perhaps undermine it by slapping a 2 per cent voting cap on the airline’s new foreign owners, as an earlier Berlusconi government did when France’s EDF acquired a large stake in Edison, Italy’s second-largest power utility. This notwithstanding President Nicolas Sarkozy’s new Italian wife.
Second, the caretaker administration is also facing a race against the clock to clinch the Air France-KLM deal before elections are held. Air One, the small, privately owned Italian airline that has also been seeking to acquire Alitalia, has launched a legal challenge against Rome’s decision to give Air France-KLM exclusive rights to negotiate a merger. This is clearly a delaying tactic to help it gather more support to mount a counter bid.
Air One is already backed by one of the country’s biggest banks – San Paolo Intesa. Some heavy hitters of global finance – Goldman Sachs, Nomura and Morgan Stanley – also seem to have joined its camp.
The balance now seems to be tilting towards Air One, for all the caretaker government’s commitment to push through the Air France-KLM deal. The problem is that something needs to be done quickly. Alitalia is continuing to bleed and is being forced to sell precious assets – some of its London Heathrow slots for example – to stay afloat. Unless a solution is found, the airline by its own admission will run out of cash by the summer.
Air France-KLM insists it is still committed to negotiate a takeover. But such a deal has never been a make or break transaction for the Franco-Dutch carrier. It could happily live without it. So Air One’s Carlo Toto has a great opportunity to come up with a credible alternative to salvage the flag carrier. He must do so swiftly. If he does not, his own credibility will be questioned and Alitalia will simply glide a little closer to the grave.
Copyright The Financial Times Limited 2008
