Alitalia takes to the skies once more

13 January 2009

Air France-KLM has picked up a 25 per cent stake in Alitalia, giving Italy's bankrupted national carrier a fresh lease of life. The deal, worth 323 million euros ($443 million), was made official on Monday, and the first flight of the 'new' Alitalia will take off on Tuesday.

The move was hailed as a breakthrough by Compagnia Aerea Italiana (CAI), the consortium of 21 investors that owns Alitalia after it was privatised earlier this year, as well as by experts. ''It reaches objectives beyond our expectations,'' said Roberto Colaninno, chairman of the scooter maker Piaggio, who also chairs CAI.

Industry watchers say an international partner was vital to supplement Alitalia's 13 long-haul routes. The agreement will join France, Italy and the Netherlands, and help bring in passengers from Britain, Scandinavia and Germany. The recent merger with Air One, another Italian carrier, should also help funnel more business to these routes.

The agreement gives Air France-KLM three seats on Alitalia's 19-member
board of directors, and 2 of 9 seats on its executive committee. A four-year lock-up period prevents anyone from selling their shares outside the investor group, and shares offered for sale in the fifth year must first be offered internally. The deal allows Alitalia to seek a stock market listing after the third year.

This means that while Air France-KLM will be the majority shareholder, it will not be able to buy any more of the airline for the next four years. However, it can increase its stake in the event of a rights issue to recapitalize the airline. The lock-up will become invalid should Alitalia be listed on the stock market.

The two companies said that Rome Fiumicino and Milan Malpensa airports would join ''on an equal basis'' the Paris and Amsterdam hubs operated by Air France-KLM. Alitalia will be run independently from Air France-KLM. The alliance would generate 720 million euros in cost savings for Alitalia over three years, the companies added.