Air France-KLM says no to Alitalia capital increase

2013-11-15 13:13

Paris - Air France-KLM, one of Alitalia's major shareholders, said Thursday it would not take part in the multi-million-euro recapitalisation plan to save the embattled Italian airline.

Alitalia is in debt to the tune of 1.2 billion euros ($1.6 billion), and shareholders in the airline gave unanimous approval to a capital increase of up to 300 million euros last month in a bid to save the firm from bankruptcy.

Then earlier this week, the Italian airline announced it had pushed back Thursday's deadline for subscription to the capital increase to November 27 to give shareholders such as Air France-KLM time to look at a new strategic plan adopted by the board.

But on Thursday, the Franco-Dutch group -- which owns 25 percent of Alitalia -- announced it would "not subscribe to the capital increase".

"Even if the industrial component of the new plan presented yesterday (Wednesday) by Alitalia is a step in the right direction and is receiving Air France-KLM's full support, the necessary financial restructuring measures are still not yet met," the group said in a statement.

"The financial part's not what it should be," Air France-KLM's chief executive, Alexandre de Juniac, told French newspaper Le Figaro.

"That's why, logically, we haven't agreed" to the plan, he said, criticising Alitalia for not providing enough details and saying it was too late to save the plan in its current state.

"If Alitalia finally deals with the financial aspect, then we'll be open" to reconsidering, he said.

Air France-KLM is itself in the midst of a major restructuring drive to pull out of deep financial problems and cope with low-cost competition.

It said last month its third-quarter operating profit had leapt by nearly a third, in what De Juniac called evidence that the measures were working.

He said at the time Alitalia also needed a "profound restructuring".

Alitalia had said Wednesday that its new plan proposed "reducing the number of medium-range planes, but keeping the number of flights seen in 2013 thanks to a better use of the fleet".

It said it included a "severe reduction of costs", adding that "the number of international and intercontinental flights will be increased".

There was no mention of possible job cuts in the company's statement.

Alitalia was already bailed out by taxpayers five years ago in a controversial operation that handed a consortium of private Italian companies a majority stake, part of which was later sold to Air France-KLM.

But it is still struggling, and Italian energy group ENI has threatened to ground the fleet of planes by stopping fuel supplies because of unpaid debts.

Alitalia says Italian banks are lined up to lend it 200 million euros. And the state-owned Italian postal service has been tapped to contribute up to 75 million euros to the capital increase, triggering rivals' allegations of illegal protectionism.

Italy's government, which wants a major airline as a strategic investor in Alitalia to help it develop, said Friday it would begin looking for a new partner.

Transport Minister Maurizio Lupi thanked Air France-KLM for the help it had provided Alitalia and said it was now possible "to launch the search for another international carrier interested in a strong partnership with Alitalia".

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