Withdraws Bid After Weeks Of Bickering; Will Aeroflot Step In?

Buon riddance. On Monday, Air France-KLM announced it has formally withdrawn its takeover bid for Alitalia, after negotiations with the beleaguered Italian flag carrier fell apart over union protests.

A statement from Air France read the carrier "indicated to Alitalia that the contractual arrangements announced on 14th March with a view to launching a public exchange offer on Alitalia were no longer valid," reports Agence-France Presse.

That decision comes after weeks of bickering over the future of the Italian airline. As ANN reported, the Alitalia board accepted a $1.17 billion takeover offer from Air France-KLM last month. The takeover followed several attempts by the Italian government to sell off its stake in the troubled airline, including a failed auction involving just two bidders, Air France-KLM and rival Italian carrier Air One.

The subsequent French takeover -- described as "hard to digest" in one Italian editorial -- worked out to one share in Air France/KLM for every 160 shares in Alitalia... a valuation of just .10 euro per share in the Italian airline.

Investors weren't the only ones who felt slighted by Air France-KLM's takeover plan. Unions demanded the buyers throw out plans to fire some 2,100 Alitalia workers, as part of efforts to streamline the hemorraging airline. That proved to be an unwise move... as Air France-KLM sent its negotiating team home April 2, and declared the deal all-but-dead.

Also on April 2, Alitalia CEO Maurizio Prato -- who had been a fierce proponent of the Air France takeover -- suddenly resigned out of frustration, reportedly calling Alitalia "cursed," adding "only an exorcist" could save it. Despite the obvious hyperbole, few in the industry were especially inclined to disagree with him... but both sides did return to the table five days later, with both Air France and the Italian government reasserting the purchase offer represented the best hope for the struggling carrier.

Alas, those talks proved for naught... and once again, the future of Alitalia appears bleak. There may be one last hope for the airline, however... as last week, Italy's prime minister-elect, Silvio Berlusconi, suggested Russia's Aeroflot as a potential takeover bidder, as part of an international partnership.

At the moment, Alitalia reportedly loses as much as one million euros a day. The carrier had about 170 million in euros in the bank as of March 31, and the Italian government suggested this week it might lend the airline as much as 150 million euros on top of that to keep Alitalia out of bankruptcy, while it looks for another bidder.

As they say in Italy (well, what the Babel Fish online translator SAYS what they say in Italy) -- l'orologio sta muovendosi.

FMI: www.alitalia.com/, www.airfrance.us, www.aeroflot.com