Air France-KLM Poised To Clinch Alitalia Alliance
January 8, 2009
Air France-KLM on Thursday looked to have all but sealed an alliance with Alitalia as rival Lufthansa threw in the towel after a three-month battle for a minority stake in the revamped Italian airline.
Echoing earlier remarks by Italian Prime Minister Silvio Berlusconi, Lufthansa confirmed it failed to make a firm offer for the stake after aggressively lobbying to make inroads into the lucrative Italian market amid an economic downturn.
With Alitalia's formal relaunch as a smaller airline just five days away, a Lufthansa spokesman said it had only proposed a plan for Alitalia to cooperate within the Star Alliance to which the German carrier belongs.
An Italian minister said an alliance with Air France-KLM now appeared inevitable.
"There's not much doubt now on this now," Defence Minister Ignazio La Russa told reporters after a meeting with Berlusconi.
The Franco-Dutch carrier will pay roughly EUR300 million euros (USD$406.7 million) for a 25 percent stake in the reshaped airline, a source close to the Italian airline said. Alitalia's board will meet on Monday to approve the sale, the source said.
The deal still faces opposition from politicians in north Italy who fear Air France-KLM's plans will favour Roman airports at the expense of Milan's Malpensa hub, but a source close to Alitalia said the deal already had the government's blessings.
Umberto Bossi, the head of the Northern League -- a junior partner in the Italian government -- was holding talks with Berlusconi on Thursday in a bid to pull off a last-minute coup for Lufthansa, but few expected his suggestion to prevail.
Instead, local media said Bossi would push Berlusconi to open up slots and liberalise air traffic rights so as to allow other airlines to boost flights out of Malpensa Airport.
Both Air France-KLM and Lufthansa had been eyeing Alitalia as a springboard to gain a foothold in Europe's fourth-largest aviation market, which combines busy business routes in Italy's north with heavy tourist traffic to destinations such as Rome.
Alitalia filed for bankruptcy last year after muddling through years of losses, labour strife and inefficiencies but still dominates air traffic on the lucrative Milan-Rome route.
The CAI group of Italian investors bought the profitable parts of the company last month and has adopted its name. CAI plans to turnaround the airline with a revamped network and slimmed-down employee base to be launched on January 13.
But in a reminder of the lingering challenges facing the carrier, Alitalia cancelled dozens of flights on Thursday due to an impromptu protest by employees at Rome's Fiumicino Airport.
The Air France-KLM deal comes with airlines facing their worst downturn in decades as the economic crisis hits demand.
Air France-KLM, Lufthansa and British Airways are jockeying for advantage and are expected to emerge as Europe's only major network airlines among the legacy carriers, as smaller airlines fold or agree to be taken over.
Air France-KLM said earlier on Thursday it had suffered a 20.4 percent slump in cargo traffic in December, swamping the airline's efforts to match supply with demand by reducing its available capacity by 6.2 percent.
The cargo load factor fell 10.6 percentage points to 59.6 percent, it said. Passenger traffic rose 1.3 percent, lifting the load factor to 78.9 percent as capacity rose 0.9 percent.
AirWise, © Ascent Pacific 2009
