ATW Daily News

Air France, Air One lead charge for Alitalia; Lufthansa opts out

Friday December 7, 2007

Alitalia yesterday accepted nonbinding bids from Air France KLM and Air One parent AP Holding and a consortium led by Italian attorney Antonio Baldassarre, taking a critical step in a protracted effort to sell off a majority stake of the beleaguered airline.

Lufthansa, also identified as a possible candidate, opted not to present an offer. AZ said it was committed to "rapidly identifying industrial and financial subjects committed to carry forward Alitalia's restructuring, development and relaunching" and that its board will meet "presumably next week" to select a partner for exclusive negotiations (ATWOnline, Dec. 6).

AF KLM said it "wishes to share with Alitalia the benefits of the profitable growth strategy it has successfully implemented over the last four years" and that "by joining Air France-KLM, it would be part of the world's leading air transport group, thus strengthening its position." The Franco-Dutch group did not disclose financial details or the restructuring measures it intends to pursue, indicating only that through the merger AZ "would be able to develop a business plan which is in line with the founding principles of the Survival and Transition Plan prepared by Chairman Maurizio Prato and his management team."

AF KLM added that it intended to position AZ to reclaim the Italian market. The Alitalia brand would be retained and the company would establish Rome Fiumicino as a European and intercontinental hub like Paris Charles de Gaulle and Amsterdam Schiphol, while "many" medium- and long-haul direct services would operate to and from Milan Malpensa.

AP Holding said it was willing to invest more than €4 billion ($5.89 billion) if it acquires the flag carrier. "AP Holding's five-year plan 2008-2012 foresees improvement and relaunch of the company that will become Europe's fourth largest airline, reaching breakeven in 2009 and profit in 2010," it stated. APH added that most of its investment would be used to renew AZ's medium-haul fleet but it also would acquire new long-haul aircraft.

It intends to maintain intercontinental hubs at FCO and MXP and said the integration of AZ and Air One would "strengthen Italian leadership on the domestic Italian market." It noted its offer is backed by several banks, including Intesa Sanpaolo, Morgan Stanley, Nomura and Goldman Sachs, which has the role of financial adviser.

Lufthansa said that although Alitalia's brand, market, network and management team "were all very promising," the German carrier is well positioned in Italy with flights to 16 destinations and the "strong network" of subsidiary Air Dolomiti that "perfectly covers the North Italian market. The financial risk of this transaction had to be considered, as well as a potential loss of the investment grade rating and its consequential costs for further multibillion-euro investments."

by Cathy Buyck

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