Latest Reorg Proposal Calls For Merger With Air One SpA
The buzzards have been circling over
struggling Italian flag carrier Alitalia SpA for some time... and
on Friday, airline executives capitulated to the inevitable, and
filed for insolvency and protection from their creditors.
Bloomberg reports the Italian government assisted with
Alitalia's decision, modifying the country's bankruptcy laws
Thursday to accommodate what will likely be a massive bankruptcy
case. But some investors believe the airline may emerge from
insolvency as a streamlined, profitable carrier.
A group of investors, headed by Piaggio SpA Chairman Roberto
Colaninno, has proposed the "Phoenix" plan for Alitalia. Like the
mythical bird, that proposal would allow Alitalia to rise from the
ashes of its own demise... but only after the airline sells off its
unprofitable units, slashes jobs... and merges with its largest
domestic rival, Air One SpA.
Those investors would put up about $1.5 billion of their own
money to buy and finance the merged airline, which would then own
about 65 percent of the Italian market. The next step is for
Italian officials to name a special commissioner to organize the
sale of Alitalia's assets, and implement the Phoenix plan.
"This is a needed first step toward returning the company to
profit," said Edoardo Liuni, an analyst at IlNuovoMercato in Rome.
"The next, fundamental move will be to choose the right
international partner."
They may not have to look far.
As ANN reported, the French-dominated Air
France-KLM Group submitted a $1.17 billion offer to take over
Alitalia earlier this year, which was accepted by the Alitalia
board. The bid 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.
Though the Air France deal had its merits (namely, insuring the
survival of the Italian carrier) it also would have meant the
French takeover of an Italian airline -- a scenario described as
"hard to digest" in one Italian editorial. There were also
accusations that Air France-KLM severely underbid the carrier --
valuing Alitalia shares at just .10 euro -- and unions didn't like
the buyers' plans to cut 2,100 jobs.
As a result, Air France-KLM threw up its hands in April, and
walked away from the table... but with a new buyer now in the game,
the group announced Thursday it could be persuaded into buying a
stake in the new company.
Those unions who opposed Air France's job-cutting plans may have
also since reconsidered that opposition, too. The reorganization
plan currently in place at Alitalia -- put forth by
recently-elected Italian Prime Minister Silvio Berlusconi, and
backed by the country's second-biggest bank, Intensa Sanpaolo --
called for as many as 7,000 jobs to be cut.
That was before Alitalia declared insolvency... so that figure
may just be a starting off point.