Air France – Alitalia talk amidst Italian crisis

Air France officials are trying to expedite talks with the Italian government that would eventually see France’s flag carrier take-over its struggling rival, Alitalia. The only problem is that with Italy in the midst of a major political crisis, these negotiations and the projected outcome may be in jeopardy, according to many analysts. Some believe that the downfall of Romano Prodi’s government could deal a fatal blow to the Air France deal. The markets reacted and Alitalia’s shares went tumbling down. One journal, however, cited sources which claimed that if officials at both ends are able to speed up the negotiation process, they may be able to close a deal within the next four to five weeks, instead of the originally projected two month timeframe.

Italy’s government is looking to sell its controlling 49.9% stake in the national carrier, which has been in the red for years and is weighed down by a large debt. According to Forbes, Air France is planning on paying around 0.35 euros per share.

Prime Minister Romano Prodi’s centrist government has been supportive of the sale and now clearly favours Air France over any other potential buyer. Yet with Prodi’s government in shambles following a lost vote on a matter of confidence, the prime minister officially submitted his resignation. As such, doubt lingers about whether the deal can go through until a new government is elected, or at least until an interim administration is confirmed.

Air France has already indicated that if it is able to purchase Alitalia as planned, it will have to overhaul and transform the carrier in order to make it profitable. This may involve cutting back on some routes. The airline’s national status, however, will be maintained.

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