Air France decision on Alitalia rescue evenly balanced: source

Tue Oct 15, 2013 4:29pm EDT
 
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By Alberto Sisto and Cyril Altmeyer

ROME/PARIS (Reuters) - A decision by Alitalia's biggest shareholder, Air France-KLM, on whether to participate in an emergency share issue for the near-bankrupt Italian airline is evenly balanced, a source close to the Franco-Dutch carrier said on Tuesday.

Air France-KLM is crucial to Alitalia's chances of keeping flying, but the source told Reuters that the Italian carrier's survival plan fell short of its requirements.

"The position of Air France-KLM is 50:50 at this stage," the source said. "The business plan presented last week was not suitable, the conditions were not fulfilled, particularly in terms of debt restructuring."

However, the source added that Alitalia was "of strategic interest" to Air France-KLM, which owns 25 percent of the airline that has not made a profit for more than a decade.

Air France-KLM AIRF.PA approved the 300 million-euro ($408 million) share issue along with Alitalia's other investors during a meeting that lasted until the early hours of Tuesday.

But it is not obliged to participate in the cash call, and has always said it would attach strict conditions before giving any help. Analysts suggest Air France-KLM is dragging its feet in order to secure stricter restructuring concessions from the Italian government and other shareholders.

The cash call, part of a wider bailout, is seen as only a stop-gap solution before talks on a possible tie-up between Alitalia and Air France-KLM.

Massimo Sarmi, the head of Italy's post office, which has agreed to commit 75 million euros to the capital increase, was flying to Paris to discuss matters with Air France, a second source told Reuters.   Continued...

 
Alitalia workers walk in front of the headquarter at Fiumicino international airport in Rome October 14, 2013. REUTERS/Max Rossi