April 21, 2008 / 4:58 PM / 11 years ago

Air France-KLM says Alitalia bid no longer valid

ROME (Reuters) - Air France-KLM formally withdrew its bid for Alitalia late on Monday, sharply reducing the chances that Europe’s biggest airline can be persuaded to buy the Italian flag carrier.

An Alitalia hostess sits at her check-in desk at Fiumicino airport in Rome March 30, 2008. REUTERS/Max Rossi

The Franco-Dutch carrier said in a brief statement that Alitalia had asked it to clarify its position after it quit talks with unions over conditions for the takeover that had already been agreed in principle with management.

“Air France-KLM has indicated to Alitalia that the contractual arrangements announced on 14th March with a view to launching a public exchange offer on Alitalia were no longer valid; the conditions precedent that had to be satisfied prior to launching were not fulfilled,” it said in a statement in English, French and Italian.

It was not immediately clear if Air France-KLM would consider making a fresh bid, and no further comments were available.

The conditions Air France-KLM had set included getting approval of unions and of a new Italian government. The state owns 49.9 percent of Alitalia.

Silvio Berlusconi, who will become prime minister next month after winning an April 13-14 general election, had said he would not accept the Air France bid in its current form and that he hoped a consortium of Italian investors would come forward instead.

A spokesman for Italy’s caretaker prime minister Romano Prodi said he would call a cabinet meeting in the next 48 hours.

The outgoing centre-left administration was talking with Berlusconi’s centre-right team to seek a future for Alitalia, he added.

Earlier in the day sources had told Reuters that the cabinet was likely to meet on Tuesday to discuss a bridge loan to keep Alitalia flying while it waits for its fate to be settled.

Air France-KLM had asked the government to extend a 300 million euro credit line to Alitalia to allow it to continue operations. Analysts say it has weeks or a few months at most before it runs out of cash.

The European Union, which has forbidden further state aid to the airline, last week said that it saw no grounds for more aid to the carrier and that any loan must be based on commercial terms.

Speculation has grown in recent days over the type of financing the government may seek to keep Alitalia afloat.

The Corriere della Sera daily said Italian banks may even come up with a 1 billion to 2 billion euro recapitalization for the airline to give it a year to find a new partner. Alitalia has said it needs at least 750 million euros by mid-year to keep flying.

Though Berlusconi has pushed the idea of a rival Italian bid and raised the possibility of talks with Russian airline Aeroflot, the French deal had been considered Alitalia’s most viable option to avert bankruptcy.

Despite calling the Franco-Dutch bid “humiliating” while on the campaign trail, Berlusconi had softened his stance since winning the election and said it could be acceptable to his government if Alitalia were given “equal dignity” in it.

Intesa Sanpaolo, an Italian bank which had backed a failed bid by smaller airline Air One, hinted that it might be interested under the right conditions.

“At the moment we’re out,” executive board chairman Enrico Salza was quoted by Ansa news agency as saying on Monday ahead of the Air France-KLM statement.

“But we could be interested in an operation if it’s not just about small provincial cabotage .... We have not yet examined any new plan but we are ready to do so if asked, with an industrial plan.”

Alitalia is considering convening its unions for a meeting on Thursday, a union source told Reuters.

Writing by Deepa Babington and Robin Pomeroy; Editing by David Holmes, Gerald E. McCormick, Richard Chang

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