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

EU Court Fines Poland for Hosting CIA 'Black Sites'

Ruling is first time a court has acknowledged suspects were held and tortured at the sites, under US program launched following the 9/11 terrorist attacks More

Migrant Issues Close to Home Spur Groups to Take Action

Groups placing water, food in the desert, or aiding detainees after release, have one common goal: no more deaths of migrants crossing illegally into the US More

Video At AIDS Conference, Prevention Pill Stirs Excitement

Truveda shows promise, spurring debate over access and other approaches More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Treatment for Childhood Epilepsy Heats up Medical Marijuana Debatei
X
Shelley Schlender
July 24, 2014 6:43 PM
In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video Death Toll From Israel-Gaza Conflict Surpasses 700

Gaza officials say a shelling hit a compound housing a United Nations-run school in the Gaza Strip, killing more than a dozen people, during an Israeli offensive in the area. Heavy fighting between the Israeli military and Hamas militants continued on Thursday, pushing up the death toll. So far, more than 730 Palestinians and 35 Israelis have been killed in the conflict. VOA's Scott Bobb has the latest from Jerusalem.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video Israel Targets Gaza Supply Tunnels

The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video Researchers Target Low-Cost Avatar Technology

Scientists at the University of Southern California Institute for Creative Technologies say 3-dimensional representations could revolutionize social media. Elizabeth Lee has more from Los Angeles.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.

AppleAndroid