Ugly duckling no more, rescued Alitalia turns heads
ROME (Reuters) - Alitalia SpA AZPIa.MI, the strike-prone Italian airline that nearly went bust last month, has become the unlikely object of a deepening Franco-German tussle for an alliance even as its government rescue runs into fresh snags.
An investor group buying Alitalia's profitable assets is busy meeting executives of one-time suitor Air France-KLM this week and Lufthansa the next, as their battle for a small stake to grab a toehold in the lucrative Italian market intensifies.
British Airways (BAY.L), which until recently emphatically denied any interest in Alitalia, is also eyeing a commercial alliance, though it denies interest in buying a stake.
Mocked as the airline no one wanted as it lurched from two failed auctions toward a bankruptcy filing, Alitalia has seen its fortunes recover somewhat after a government-backed bailout that promises to leave it debt-free and privately-owned.
"Alitalia's greatest quality right now is its 'X factor' -- no one knows what this airline is capable of now," said Doug McVitie of Arran Aerospace consultancy.
"It's like the beauty of an unwrapped Christmas present -- it could be empty and broken for all you know, given this is Alitalia, but there is an element that it could play a greater strategic role in the sector."
Alitalia passenger traffic fell 28 percent in September as its near demise generated frenzied local newspaper attention.
Italian media have perhaps optimistically painted the suitors as desperate to strike a deal, reporting Lufthansa had set up a "secret" meeting to lobby Alitalia unions on Wednesday even as Italian investor consortium CAI met Air France-KLM across town.
Union officials denied any such meeting with Lufthansa.
Analysts have said Lufthansa (LHAG.DE) has the edge in talks after winning the open support of Italy's government and unions, though CAI has been at pains to deny favouritism. But a senior Air France-KLM official said, "We have not had our last word."
"At the moment it is too soon to say who will strike the deal, which will probably happen only after the new Alitalia is launched," said another source close to the talks.
Both airlines want a piece of the carrier to cement their position in Italy's booming travel market, and prevent Alitalia -- one of several European carriers in play in a fast-consolidating sector -- from being snapped up by the other.
"It's a question of making sure that Alitalia doesn't fall into the hands of your competitors, so while it may not have great value in itself, it has strategic value," McVitie said.
CUTTING IT CLOSE
All the enthusiasm over linking up with Alitalia may yet be premature as its investor bailout runs into delays and new snags despite overcoming the main hurdle of union opposition. Continued...
