Struggling Alitalia gets EUR 300 million loan

23rd April 2008, Comments 0 comments

The near bankrupt Italian carrier will receive an emergency loan after Air-France-KLM withdrew takeover offer.

23 April 2008

ROME - The outgoing Italian government agreed Tuesday to extend an emergency loan of EUR 300 million to struggling flag carrier Alitalia after Air France-KLM withdrew its takeover offer, Italian media reported.

The decision was taken at a late cabinet meeting presided over by outgoing centre-left Prime Minister Romano Prodi, who will hand over to conservative leader Silvio Berlusconi in mid-May following last week's elections.

Addressing a news conference, Prodi blamed "excessive interference during the election campaign by specific political parties and numerous difficulties posed by the unions" for Air France-KLM's withdrawal.

During the election campaign, Berlusconi repeatedly claimed that an all-Italian consortium was in the offing to rescue Alitalia but none has so far materialised.

Air France-KLM left the negotiating table on 2 April after the unions demanded that all Alitalia operations be kept intact - something Europe's largest airline had already ruled out.

Alitalia's unions have since been clamouring for state aid to buy time to find an alternative rescue package.

The bridging loan is to be repaid by the end of the year, Prodi said, adding that Berlusconi had asked for a larger loan than the outgoing government had intended to make.

"We acted responsibly," he said.

Italian reports had predicted a loan of no more than EUR 200 million.

Outgoing Economy Minister Tommaso Padoa-Schioppa said the decision was taken in highly unusual circumstances - in the interregnum between governments - and that he was "waiting to see" how the EU would respond.

Development Minister Pierluigi Bersani said earlier Tuesday that a final decision on Alitalia's future would have to wait for the new Berlusconi government while warning that "the new phase will see greater problems than we have seen so far, especially for the workers."

Air France-KLM's definitive withdrawal, ending three weeks of speculation over whether it might reconsider, left Italy's long-struggling flag carrier with little choice but to contemplate bankruptcy or receivership.

An immediate hurdle is that the emergency loan could be considered fresh state aid for Alitalia, inviting EU sanctions.

On Tuesday, a European Commission spokesman said in Brussels that Alitalia, which is losing about EUR 1 million a day and had about EUR 170 million in the bank at the end of March, could not receive state aid until 2011 under EU rules.

Alitalia eliminated more than two-thirds of its flights from Milan's Malpensa airport, cutting all but 366 of the more than 1,200 weekly flights.

Berlusconi will become prime minister for the third time since 1994 after his coalition scored a comfortable victory in the elections.

The Italian government has been trying for years to sell off its 49.9 percent stake in the airline.

It could decide to place the company in receivership, naming a special administrator who would decide whether to restructure the firm or begin bankruptcy proceedings.

Meanwhile in Paris on Tuesday, an Air France-KLM spokeswoman said the company was relieved after announcing the decision.

"Alitalia's economic situation had deteriorated from the time Air France-KLM launched its bid on 14 March," she said, citing the rising price of oil, a severe hardship for Alitalia with its ageing fleet of fuel-guzzling aircraft.

If Alitalia were to go into receivership, Air France-KLM could be interested in some of its operations, such as maintenance, according to one Paris analyst.

A tie-up between Alitalia and Aeroflot of Russia, mooted by Berlusconi after he met Russian President Vladimir Putin last week, could also favour Air France-KLM, Aeroflot's partner in the Sky Team alliance.

[AFP / Expatica]

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