News / Europe

Rival Airline Attacks Alitalia Rescue as Illegal

An Alitalia plane approaches to land at Fiumicino international airport in Rome, Oct. 14, 2013. (Reuters)
An Alitalia plane approaches to land at Fiumicino international airport in Rome, Oct. 14, 2013. (Reuters)
Reuters
A leading European airline group denounced Italian plans to rescue Alitalia as illegal on Monday, as shareholders were due to vote on a capital increase to keep the near-bankrupt carrier flying.

International Airlines Group, which owns British Airways and Spain's Iberia, urged the European Commission to intervene over the Italian government's attempts to stitch together a bailout for Alitalia.

A 300 million euro [$407 million] capital increase forms a major part of the rescue, which aims to keep Alitalia alive while it works out how to ensure its long-term survival, but the participation of its top investor Air France-KLM  remains far from certain.

IAG said the rescue breaks European Union rules. “We have always been opposed to state aid,” said a spokeswoman for IAG, Europe's third biggest airline group by market value. “It's protectionist, undermines competition and favors failing airlines that have not got to grips with economic reality.”

“We would urge and expect the EU Commission to take interim measures to suspend this manifestly illegal aid,” she added.

In Brussels, the Commission said it expected Italian authorities to inform it of the plan. “Only after receiving the notification will we be able to assess its compatibility with EU state aid rules,” Antoine Colombani, EU Commission spokesman for competition policy, said in an email.

Alitalia, which last turned a profit over a decade ago, was thrown a lifeline on Friday when its board members - including Air France-KLM - approved the government-led 500-million-euro bailout. The emergency plan includes the capital increase and loans worth 200 million euros.

However, all shareholders have 30 days to decide how much money to sink into the issue of new shares. Even if they support Monday's vote, they remain under no obligation to take part later in the cash call.

Air France-KLM, which owns a 25 percent stake and backed the bailout plan when it was presented to Alitalia's board last week, said it would decide on whether to participate only after Monday's shareholder meeting.

The Franco-Dutch airline said on Friday it would set “very strict” conditions before giving any help. Air France-KLM was concerned about the lack of clarity on Alitalia's valuation and insisted on much tougher restructuring, believing the emergency plan was not enough, sources close to the matter said.

“We still don't see how Alitalia could meet any of Air France-KLM's conditions,” one source said, adding any decision would still require a meeting of the Franco-Dutch group's board.

Alitalia is valued at between zero and 150 million euros, according to a study by Credit Suisse commissioned by the airline, a source close to the matter said.

Italy brought in the state-owned post office last week to help save Alitalia. Taking into account a bond convertible into equity subscribed by shareholders for 95 million euros this year, the post office could get a stake of between 14-19 percent if it put a promised 75 million euros into the cash call.

If Air France-KLM does not participate, it risks being overtaken by Poste Italiane as the top shareholder and its  stake could drop below 15 percent. This would mean it would effectively lose its veto power on new shareholders coming in.

Strategic partner

Any of Air France-KLM's strict conditions could clash with Alitalia's long-haul ambitions, analysts said.

Alitalia's new CEO Gabriele Del Torchio wants the company to focus on the higher-margin long-haul market after its plans to become a strong regional player came unstuck due to tough competition from low-cost players and high-speed trains.

Analysts said Air France-KLM remained the natural strategic partner for Alitalia, but the group's appetite was limited as it pushes through its own unpopular restructuring at home.

“I am sure they would strategically want to have Alitalia in their camp, but the last thing they want at the moment is to consolidate a rotting company,” said airlines expert James Halstead, managing partner at UK-based Aviation Strategy Ltd.

A cash call without Air France-KLM would raise the uncertainty over Alitalia's future as it was meant to be only a stop-gap solution before talks on a possible tie-up of the two.

The cash will probably not last long and Alitalia needs a partner such as Air France-KLM to boost its long-term prospects.

The support of Alitalia's domestic investors for the capital increase is also in the balance. Its second biggest shareholder, the Riva family, has had its assets seized in a judicial investigation, including its Alitalia's 11 percent stake.

The airline is currently owned by a disparate group of 21 investors including bank Intesa Sanpaolo and highway operator Atlantia, a consortium pulled together in 2008 by then prime minister Silvio Berlusconi after he rejected a takeover by Air France-KLM.

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs