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

US Border Patrol Union Accused of Taking Sides on Immigration

Report alleges agents leaking info to immigration opponents, appearing at their private events; Center for Immigration Studies director defends agents' actions More

Video Blind Somali Journalist Defies Odds in Mogadishu

Reporting from Somali capital for past decade, Abdifatah Hassan Kalgacal has been working at one of Mogadishu's leading radio stations covering parliament More

Video Rights Monitor: Hate Groups' Use of Internet to Inflame, Recruit Growing

Wiesenthal Center's Abraham Cooper says extremists have become skilled at celebrating violence, ideology on Web More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Hate Groups Spread Influence Via Interneti
X
Mike O'Sullivan
June 30, 2015 8:20 PM
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 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 Syrians Flee IS Advance in Hasaka

The Syrian government said Monday it has taken back one of several districts in Hasaka overrun by Islamic State militants. But continued fighting elsewhere in the northern city has forced thousands of civilians from their homes. In this report narrated by Bill Rodgers, VOA Kurdish Service reporter Zana Omer describes the scene in Amouda, where some of the displaced are taking refuge.
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 S. Korea Christians Protest Gay Rights Festival

The U.S. Supreme Court decision mandating marriage equality nationwide has energized gay rights supporters around the world. Gay rights remain a highly contentious issue in a key U.S. ally, South Korea, where police did a deft job Sunday of preventing potential clashes between Christian protesters and gay activists. Kurt Achin reports from Seoul.
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 Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. 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.
Video

Video In Syrian Crisis, Social Media Offer Small Comforts

Za’atari, a makeshift city in Jordan, may be the only Syrian refugee camp to tweet its activities, in an effort to keep donors motivated as the war in Syria intensifies and the humanitarian crisis deepens. Inside the camp, families say mobile phone applications help hold together families that are physically torn apart. VOA’s Heather Murdock reports.

VOA Blogs