Alitalia’s Wounded Wings

Jean-Cyril Spinetta – Ceo of Air France/Klm – put the world “end” to a long and controversial negotiation with the flagship carrier Alitalia.

“…Contract it signed in March that could have led to a takeover bid for Alitalia SpA is no longer valid, as the conditions that had to be satisfied before launching a bid were not fulfilled” said a statement from Spinetta’s company – not to mention the soaring oil process and the changed political situation.

During the elections, Berlusconi has been proposing a “Italian solution” for the flagship and in a recent meeting, he spoke about the possibility of calling “Aeroflot” into the deal with the Russian strongman, Vladimir Putin.

That would be ironic: the hammer & sickle has just been erased from the political scene and it could appear again into the Italian skies, like some sort of a ghost.

So, Spinetta’s 220 million dollars offer does not exist anymore, it is gone, like the wind. “Alitalia did not meet the necessary conditions” -said spokeswoman of Air France/Klm, Veronique Branchet -adding no comments to the brief statement.

If the offer is “no longer valid” the immediate problem Alitalia will have to solve is a mere question of money. Not a easy one, considering that the company has been losing 1.5 million dollar a day during the last year.

Let’s try to imagine the scenario in the light of a potential Alitalia bankrupt:

1)Berlusconi’s new government will have to cope with a tragic fiasco during its first days – it would be a political disaster for the entire country – not just for new Prime Minister.

2)In times of (economic) troubles, with a country already facing the consequences of a very strong inflation and the loss of buying power of its citizens, a terrible blow hitting the stomach of the tourism industry would be quite dangerous.

3)Italy has been dealing with a not very efficient public transportation system from the very first days of existence as a Republic. The collapse of Alitalia would imply, therefore, a matter of public order – due to the lack of key routes – at least according to many pundits.

4)Alitalia’s employees are almost 18.000, between ground and air personnel. What would they end up doing in case of a collapse of their company?

We are talking about a dantesque scenario, no doubt.

A possible solution would be the bridging loan of $478 million dollars -that the outgoing center –left government approved in order to avoid bankruptcy after a cabinet meeting held yesterday. Romano Prodi, later on, observed that this short time period loan (which is supposed to be paid back by Alitalia at the end of the year) will provide the forthcoming Prime Minister Silvio Berlusconi enough time to take a decision about the flagship company.        

According to the European Commission, though, “Alitalia has already received state aid until 2011…at this stage we have not been informed or notified about any decision to give any financial support to the company”. The EU Commission would not – most probably – allow the bridging loan. Apparently the commission was not updated about the financing measure that the Italian government just approved.

In the meantime, trading Alitalia shares has been suspended for the entire day (yesterday) pending the release of a statement, said the bourse. That is just a economic matter, after all. Instead, from a political point of view, the Italian left has already started to point the finger at Berlusconi: according to Francesco Rutelli (the next mayor of Rome, perhaps?), the Air France/Klm withdrawal is a “disastrous consequence” of Berlusconi’s behavior during the elections.

The situation seems to be catastrophic. There are, nevertheless, two main facts to consider:

First: Let’s put Spinetta’s step back in the right perspective: it is a standardized procedure. The Ceo of the most profitable air company (based on revenues) has been negotiating with the former Italian Prime Minister, Romano Prodi. Berlusconi is another planet. Therefore, the “conditions” mentioned in the Air France’s statement, will have to be negotiated again. The document might represents nothing but a formal gesture.

According to the head of Alitalia pilots union “Anpac” – Fabio Berti: ” there is no withdrawal of the offer…and Air France/Klm didn’t say it was no longer interested in Alitalia but only that, for now, there aren’t the conditions to launch a bid”.

Second: regarding the bridging loan that could momentarily save the company: the question of public order cannot be called in, even when it comes to key routes: Italy, in fact, still has a military aviation on which it can count, in the face of exceptional situations, to fulfill the necessities of commuters.

What will the European Commission do? The most probable thing would be imposing sanctions, of course. The real question is, anyway, who is going to save Alitalia in the long run?

It is true – as reported by Il Sole 24 Ore – that a bridging loan would avoid putting Alitalia into administration and would also allow the new government to search for a buyer. Keep in mind one name, though, and “google” for it: Bruno Ermolli, founder and Ceo of “Sin&rgetica” as well as longtime ally and advisor of Berlusconi, he might end up being one of the key pieces on the chessboard. Apart from Spinetta.




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Andrea Loquenzi Holzer

The truth will set you free

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