In brief: Alitalia story, Air France-KLM gives up

Posted on April 23, 2008 by Matthieu Desiderio

After a couple weeks of discussions with the labor unions of the Italian national airline Alitalia, Air France–KLM group finally announced on Monday, April 21, 2008 that “the contractual commitments taken on March 14th of this year with the aim of the launch of a public offer of exchange on Alitalia were not valid any more.” The group officialises this way its renunciation to repurchase the Italian (dying) airline…

Air France deal fails: is this unions or “Government” fault?

There were precise conditions under which Air France–KLM would takeover the Italian company, such as the approval of its reorganisation plan by both the Italian Government and the labor unions, who have been causing the fatal problem in the negotiations. They basically refused staff cuts (2,100 employees) and the cessation of certain activities previously done by Alitalia (luggage handling, and maintenance mainly).

Besides, support from the Italian Government has lessened since Silvio Berlusconi is back as Italian Prime Minister, pursuing his fight against the French-Dutch airline industrial choice: Berlusconi disagrees with Air France-KLM strategy to concentrate Alitalia’s international flights in Rome’s hub, and abandoning the hub in Milan Malpensa Airport.

However, Berlusconi recently showed a more flexible position, eventually adding that he entered in negotiations with the Russian airline Aeroflot. Also, Italian airline Air One, previously pushed aside by the previous Italian Government, may be back on track.

Would Alitalia go bankrupt?

Short term “survival” of the national Italian airline is not sure any more. The European Union forbids the Italian government to subsidise Alitalia one more time, and the airline has to gather €750 million by the end of June 2008 to ensure continuous operations.

Have Air One or Aéroflot credible and long-lasting, fast projects for Alitalia’s resumption? Air France – KLM proposed a no negotiable plan to the company by appearing as the only operator capable of avoiding the bankruptcy with such a close “deadline”. Is this announcement from the French-Dutch airline a definitive stop of the negotiations, or a last gamble to finally impose its own decisions and methods?