Can Alitalia be rescued?

Silvio
Berlusconi has announced that a bid to rescue Alitalia, Italy’s main airline,
will be put forward in the next three to four weeks. The bid would involve an
Italian consortium led by domestic carrier Air One and possibly some other
northern Italian companies.

 
The move
could put an end to Alitalia’s negotiations with Air France-KLM. The
French-Dutch airline presented a bid on March 14 which disappointed most
obervers as it was substantially below the preliminary offer made in December.

 
Nonetheless,
Alitalia’s board agreed to start negotiations as no other offer was around at
the time. While Alitalia’s CEO, Maurizio Prati, seemed confident to complete
the deal with Air France-KLM, two factors emerged which greatly complicate the
French-Dutch takeover bid.

 
First of
all, the offer involves large-scale restructuring and job cuts that are
strongly resented by Italy’s trade unions. Since Air France-KLM regards the
assent of the unions as a condition of the takeover, the deal looks uncertain.
Secondly, under Air France-KLM’s plans, Alitalia would need to downsize its
operations at Malpensa, Milan’s main airport. This has caused consternation
among northern politicians and parts of the business community.

 
For as long
as there was no other solution around, Air France-KLM’s offer, while
politically controversial, seemed the only viable option to save Alitalia from
going out of business. Now, Berlusconi’s promise to organize a rival bid may
change that.

 
If elected
prime minister on April 14, Berlusconi would veto the Air France-KLM deal: “The
reply to Air France will be given by the next prime minister and will be a dry
and complete ‘no’. Not because it is against France but against the conditions
set.” Given that Air France-KLM has always maintained that it will only push
ahead with the takeover if the new government agrees, Berlusconi’s move
basically cuts out the French-Dutch carrier unless it changes the conditions of
the offer.

 
Berlusconi’s
announcement to put together an Italian deal to save Alitalia has triggered off
speculation on who, apart from Air One, could be involved. At one point,
Berlusconi indicated that the companies of his children could take part in the
rescue of the airline. This claim was later qualified. Another idea floated was
for Intesa San Paolo, Italy’s biggest bank, to make a new offer for financing
Air One’s takeover, but the bank denied any such plans.

 
The move is
certainly not without its risks. Berlusconi’s political opponents, Walter
Veltroni and Pierferdinando Casini have even accused the leader of the PDL of
deceiving voters prior to the April elections. However, if Berlusconi really
does manage to put together a resuce bid for Alitalia which also secures the
future of Malpensa airport, he would see his popularity greatly boosted
especially among voters in the North of Italy.

 
The final
chapter in the Alitalia-takeover saga has not yet been written. Berlusconi’s move
came as a surprise but further details of his plan need to emerge before it can
be evaluated. Time is pressing: making losses of ca. one million Euros a day,
Alitalia is on the brink of bankruptcy and further state aid is illegal under
EU law. An Italian deal would need to be organized very soon.