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)
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

Guatemala Mudslide Death Toll Rises to 86

Death toll is expected to continue to rise as emergency crews dig through tons of earth for an estimated 350 people still missing More

Goodbye Pocahontas: Photos Reveal Today's Real Native Americans

Weary of stereotypes, photographer Matika Wilbur is determined to reshape the public's perception of her people More

Debris Found in Search for Missing Ship

Objects located Sunday have not yet been confirmed to be from the 240 meter container ship, El Faro, which disappeared in the eye of Hurricane Joaquin, according to US Coast Guard More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Russia’s Syria Involvement Raising Concerns in Europei
Luis Ramirez
October 02, 2015 4:45 PM
European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video First Self-Driving Truck Debuts on European Highways

The first automated semi-trailer truck started its maiden voyage Friday, Oct. 2, on a European highway. The Daimler truck called 'Actros' is the first potentially mass-produced truck whose driver will be required only to monitor the situation, similar to the role of an airline captain while the plane is in autopilot mode. VOA’s George Putic reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Migrant Influx Costs Europe, But Economy Could Benefit

The influx of hundreds of thousands of refugees and migrants is testing Europe’s ability to respond – especially in the poorer Balkan states. But some analysts argue that Europe will benefit by welcoming the huge numbers of young people – many of them well educated and willing to work. Henry Ridgwell reports from London.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

Video New Fabric Helps Fight Dust-Related Allergies

Many people around the world suffer from dust-related allergies, caused mainly by tiny mites that live in bed linen. Polish scientists report they have successfully tested a fabric that is impenetrable to the microscopic creatures. VOA’s George Putic has more.

Video Burkina Faso's Economy Deeply Affected by Political Turmoil

Political turmoil in Burkina Faso over the past year has taken a toll on the economy. The transitional government is reporting nearly $70 million in losses in the ten days that followed a short-lived coup by members of the presidential guard earlier this month. The crisis shut businesses and workers went on strike. With elections on the horizon, Emilie Iob reports on what a return to political stability can do for the country's economic recovery.

Video Fleeing Violence, Some Syrians Find Refuge in Irbil

As Syrians continue to flee their country’s unrest to seek new lives in safer places, VOA Persian Service reporter Shepol Abbassi visited Irbil, where a number Syrians have taken refuge. During the religious holidy of Eid al-Adha, the city largely shut down, as temperatures soared. Amy Katz narrates his report.

Video Nigeria’s Wecyclers Work for Reusable Future in Lagos

The streets and lagoons of Africa's largest city - Lagos, Nigeria - are often clogged with trash, almost none of which gets recycled. One company is trying to change that. Chris Stein reports for VOA from Lagos.

Video Sketch Artist Helps Catch Criminals, Gives a Face to Deceased

Police often face the problem of trying to find a crime suspect based on general descriptions that could fit hundreds of people in the vicinity of the crime. In these cases, an artist can use information from witnesses to sketch a likeness that police can show the public via newspapers and television. But, as VOA’s Greg Flakus reports from Houston, such sketches can also help bring back faces of the dead.

Video Thailand Set to Build China-like Internet Firewall

Thai authorities are planning to tighten control over the Internet, creating a single international access point so they can better monitor content. VOA Correspondent Steve Herman reports from Bangkok on what is being called Thailand’s own "Great Firewall."

Video Croatian Town’s War History Evokes Empathy for Migrants

As thousands of Afghanistan, Iraqi and Syrian migrants pass through Croatia, locals are reminded of their own experiences with war and refugees in the 1990s. VOA's Daniel Schearf reports from the town of Vukovar, where wartime scars still are visible today.

Video Long Drought Affecting California’s Sequoias

California is suffering under a historic four-year drought and scientists say even the state's famed sequoia trees are feeling the pain. The National Park Service has started detailed research to see how it can help the oldest living things on earth survive. VOA’s George Putic reports.

VOA Blogs