Air France-Alitalia deal in peril

Silvio Berlusconi, a former Italian prime minister who may soon return to office after his centre-right party scores a likely victory in next month’s general election, has now made clear that he would oppose Alitalia’s sale to Air France. Until today, Berlusconi had merely implied that he does not agree with Air France-KLM’s bid to purchase Italy’s badly indebted national airline. Earlier today, however, the prime ministerial candidate clarified his position and noted that he would reject the AF-KLM purchase offer and seek to sell state-controlled Alitalia to an Italian consortium instead. Air France, which secured the backing of Alitalia’s board, as well as of the outgoing Italian government, may now not only have to contend with disgruntled unions, who seem prepared to reject the bid, for fear of major job losses, but will also have to deal with a potentially hostile new Italian government. Air France has made it clear that it would only go through with its binding offer if the new Italian government fully supported it as well. Otherwise the Franco-Dutch airline would pull the plug on the bid.

Alitalia is in dire straits, as the carrier is accumulating a loss of over €1 million every day it operates flights. As such, the carrier’s debt is also growing and both airline and government officials associated with former Prime Minister Romano Prodi have indicated that if the airline is not sold in the very near future, it would likely have no choice but to declare bankruptcy.

Berlusconi, however is holding firm to his position and told journalists that as prime minister he would give a “dry and full” ‘no’ to Air France’s bid, mainly because he finds the terms of the deal to be unacceptable.

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