Alitalia board picks Air France to buy airline

ROME (Reuters) - The board of Alitalia AZPIa.MI chose Air France-KLM AIRF.PA as its preferred buyer on Friday, saying the French-Dutch carrier was a better match than a small Italian airline favored by the unions.

Its unanimous decision on Air France-KLM’s non-binding offer must still be approved by the government, which holds a 49.9 percent stake in the money-losing flagship airline and might face pressure against letting it pass into foreign hands.

It urged the government to decide by mid-January on a bidder for exclusive talks, as planned, “in light of the company’s critical financial situation.”

Alitalia is hemorrhaging losses at a rate of 1.0 million euros a day and is weighed down by 1.2 billion euros of debt.

Air France-KLM, whose interest has stirred up nationalist sentiment in Italy, assured it would not downgrade the country’s largest airline into a regional carrier.

It said it aimed to strengthen Alitalia and outlined long-term investments worth 6.5 billion euros ($9.34 billion), which would partly be used to upgrade the airline’s ageing fleet of medium- and long-range aircraft.

That compares with 5.3 billion euros in planned long-term investments by the other bidder, Air One.

“The reputation of the Alitalia brand, a key asset for the whole group, will be developed in Italy and abroad,” said Air France-KLM Chairman and Chief Executive Jean-Cyril Spinetta.

Spinetta said the Air France-KLM was “delighted to have had our plan accepted as the best for the future of Alitalia.”


But Air One, whose plan is favored by some politicians and labor unions, fired off a statement saying it still hoped to clinch a deal -- even without the support of Alitalia’s board.

It said it would take its offer for Alitalia to the airline’s biggest shareholder, the Italian state.

Air One has played up its Italian credentials to win support for its bid. It has the backing of regional politicians worried about northern Italy losing its Milan hub under Air France-KLM.

Alitalia shares ended down 1.96 percent at 0.7583 euros before the news. They will not resume trading in Milan until the market reopens after the Christmas holidays on December 27.

In Paris, Air France-KLM was last quoted up 1.41 percent at 23.77 euros. That market will be open for half a day on Monday.

Alitalia said in a statement Air France was willing to preserve the airline’s extensive national network.

Alitalia dominates the lucrative route between Rome and Milan, but has been on the brink of bankruptcy for years and been kept going by state aid.

Air France-KLM is bidding 0.35 euros per share and is offering to buy all convertible bonds, according to a source close to the talks. It plans to cut up to 1,700 jobs.

Air One is offering 0.01 euro per share with investments of 5.3 billion euros. It plans 3,700 job cuts. Smaller than Alitalia, it is backed by Italian bank Intesa Sanpaolo


A bickering coalition of politicians from Catholics to communists, the government has moved to protect major Italian companies from foreign takeovers in the past.

It gave its blessing to an Italian-led consortium to buy Telecom Italia TLIT.MI rather than a rival bid from AT&T T.N of the United States and America Movil AMXL.MX of Mexico.

Additional reporting by Sudip Kar-Gupta in Paris, Lisa Jucca, Gilles Castonguay in Milan, Giselda Vagnoni and Deepa Babington in Rome; Editing by Rory Channing, Richard Chang