Alitalia Sale Falls Through

AF-KLM had extended their announced deadline for reaching an agreement with AZ unions and had offered several concessions. Among the proposals that helped sink the deal was that AF-KLM would significantly reduce the number of flights from Milan’s Malpensa Airport, instead using Rome’s Fiumicino Airport as the country’s single major hub. As a result, according to the announced restructuring plan, there would be a loss of 1,600 jobs for AZ workers by 2010.

In a statement, Jean-Cyril Spinetta, AF CEO, said, "I regretfully acknowledge the breakdown in negotiations, which is none of our doing. This is a project I have profoundly believed in and continue to do so, because it would have ensured Alitalia a rapid return to profitable growth.”

On the AZ side, Maurizio Prato, the airline’s CEO, has been a staunch supporter of AF-KLM. With the deal falling through, he has resigned.

The unions have asked that the government not make any decisions about the fate of AZ until after the country’s parliamentary elections on April 13-14. Favored to win in the election is Silvio Berlusconi who has made the deal into a strongly political issue.

Berlusconi has called the AF-KLM offer, “unacceptable and offensive.” During the past month or so he had indicated that members of his family, including his son, would form a consortium, occasionally, he hinted, with financing from wealthy individuals from the Mid East. None of those offers have been forthcoming.

The state owns 49.9% of AZ. The airline is said to be losing at least €1 million a day. A financial rescue from the Italian government is not likely since it is reported to have spent some €4.3 billion over the past five years to shore up the airline. The European Union has forbidden the Italian government to provide any further financial assistance.

While bankruptcy is a strong possibility, it’s understood that AZ is not going out of business at the moment, particularly with the summer travel season almost here. Italy’s largest privately held carrier, Air One, might enter the scene as a bidder for AZ. It may turn out that an Italian, “No,” a French, “Non,” and a Dutch, “Nr,” may be just words and that AF-KLM and the AZ unions would re-join negotiations and rescue the deal.