Rival airline attacks Alitalia rescue as illegal

Mon Oct 14, 2013 5:26pm EDT
 
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By Agnieszka Flak and Cyril Altmeyer

MILAN/PARIS (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 (ICAG.L: Quote), 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 (AIRF.PA: Quote) 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 favours 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.   Continued...

 
An Alitalia plane is pictured before takeoff at the Fiumicino airport in Rome October 12, 2013. REUTERS/Stefano Rellandini