Alitalia unlikely to be in for long haul without Air France: KLM
By Agnieszka Flak
MILAN (Reuters) - Five years after Alitalia was rescued from bankruptcy, the options for the troubled Italian airline appear to be few: convince top shareholder Air France-KLM (AIRF.PA: Quote) to support its new strategy or shut up shop.
Since being taken private by a consortium of Italian investors in early 2009, Alitalia has accumulated net losses of more than 840 million euros ($1.1 billion), debt of about 1 billion euros and is fast running out of cash.
An ambitious plan to become a strong regional player failed in the face of aggressive competition from low-cost carriers Ryanair (RYA.I: Quote) and easyJet (EZJ.L: Quote) and from high-speed trains on its once-lucrative Milan-Rome route.
Alitalia's new CEO, turnaround specialist Gabriele Del Torchio, has already outlined a new plan to focus on the more lucrative long-haul market, but he desperately needs cash to buy the larger aircraft needed for inter-continental flights. The company says the new strategy will help it to break even in 2015 and return to profit in 2016.
At a board meeting on Thursday, Del Torchio is expected to seek approval for a 200 million euro capital increase, possibly underwritten by Air France-KLM, plus the same sum in fresh borrowing, sources close to the matter said.
Italy's government, meanwhile, is banking on Air France-KLM to make a cash investment and increase the 25 percent stake it bought in 2009, possibly taking control of the company.
Analysts expect such commitment to come with conditions, with the Franco-Dutch group unlikely to want to take on Alitalia's debt and support all of Del Torchio's long-haul ambitions, which could clash with its own.
Air France-KLM may want to follow the example of Lufthansa (LHAG.DE: Quote), which uses Vienna and Zurich to feed its long-haul flights out of its Frankfurt and Munich hubs, analysts said. Alitalia could also be used for point-to-point routes bypassing Air France-KLM's two main hubs, possibly linking Rome with the east coast of the United States and parts of Africa. Continued...