Italy declares Air France preferred bidder for Alitalia

29.12.2007     (Times)

The long saga of who will buy Alitalia neared conclusion yesterday with Air France-KLM
named as the preferred bidder.   Alitalia is losing about €1 million ( £730,000)
a day, has €1.71 billion of debt and will run out of cash early next year, but
political interference has delayed a possible deal for 6 months.

The Italian Government said that Air France-KLM, which already owns 2% of Alitalia,
would enter exclusive talks to buy the State’s 49.9% stake. Alitalia’s board backed
the Air France bid last week.

The talks will last about  8 weeks, after which Air France must submit a binding
offer to be examined by the [Italian] Cabinet.

Air France would also cut about 1,500 jobs from Alitalia’s workforce, although
Italian unions may try to stop this. Some aviation analysts believe that Alitalia’s
problems are so dire that huge job cuts are needed to bring it back from the brink
of bankruptcy. Lufthansa, the German airline, was reported to want to halve the
11,000-strong workforce. Italian ministers have chosen Air France’s more moderate
approach, preferring it also to Air One, the second-largest Italian carrier.