Can Alitalia be rescued?

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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.

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