Italy takes bids for Alitalia

Business

State-run airline goes on sale in the hope of reviving its fortunes.

Last Modified: 29 Dec 2006 11:12

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Alitalia's future has been uncertain, it is hoped that private investors will give it a well-needed boost [AP]

The bidding process for Italy's state-controlled Alitalia has opened and with it the hope that private investors will succeed in reviving the unprofitable carrier after repeated injections of state aid have failed to do so.

Italy has invited offers of interest for at least 30.1 per cent of Alitalia's shares, and as much as the entire treasury stake of 49.9 per cent, until January 29, the treasury said in a statement posted on its website.

In setting the terms of the bidding process, the treasury said the buyers must keep a stake of at least 30.1 per cent in Alitalia until they met the targets of their industrial plan, as well as maintain the carrier's "national identity".

Claudio Morsenchio, a fund manager at Banco Emiliano Romagnolo in Bologna, Italy, said: "Alitalia must change and that means not tying investors hands, cutting in half the staff, choosing between the two hubs of Milan and Rome, finding an industrial partner for the high-growth routes to the Far East.

"It's a challenge. It's a question of being willing to change. Otherwise they'll continue with the strikes and with one flight out of two being late."

Under Italian law, a buyer of more than 30 per cent of a company must make a public offer for the rest of the outstanding shares.

Needed changes

Alitalia, which has a market capitalisation of 1.37bn euros ($1.8bn), has not made an operating profit for five years. The last time it posted a net profit was in 2002, and that only after Dutch carrier KLM paid it 200m euros to break an alliance.

The failure to turn a profit is partially due to a legacy of purchasing choices made for political purposes, it operates five different types of aircraft built by as many manufacturers, multiplying maintenance and pilot-training costs.

Also, because of local pressures and political indecision, the carrier continues to operate out of two main hubs, its Rome Fiumicino airport and the Milan Malpensa airport. Most other airlines cut costs by using only one hub.

Alitalia shares soared by as much as 5 per cent and were trading 4 per cent higher at 1.029 euros by 09:40 GMT.

A trader in Milan said in response to the soar in shares: "Any news that confirms the sale is positive."

Analysts have speculated on possible bids for the airline by rivals such as Air One and long-time potential suitor Air France KLM, but no leading contenders have emerged so far.

Should the competitive bidding process fail, Italy may also use a public offer or share swaps to cede its Alitalia stake, the treasury said.

Source:

Agencies