Company Dismisses Speculation, Adds Serious Changes Would Have To Occur

Even though Italy has officially closed its seven-month auction for its state-owned airline, Alitalia, rumors are re-circulating that Air France - KLM is still interested, but the carrier isn't talking.

According to the Dutch newspaper De Telegraaf, Air France-KLM is outlining some tough conditions if it were to take over the beleaguered carrier, specifically a clear plan for the Alitalia's privatization and financial restructuring - things it's asked for all along.

In private, reportedly, Air France officials won't exclude any options, but publicly, they brush off speculation political, industry or media pressure will force a bid.

Those close to the Air France-KLM camp say there is little chance of a change of heart, barring the occurrence of some serious changes in areas like governmental attitude, debt and labor issues, Reuters reports.

As ANN has reported, part of the problem lies in the conditions attached to the sale of the struggling carrier. Any buyer would have to take on Alitalia's existing debt, which, as of December, was more than $1.3 billion. The carrier would also have to retain an Italian identity for at least the next eight years.

Attempts to turn Alitalia around have been hampered by, among other things, the familiar combination of competition from low-fare carriers, high fuel costs and labor unrest.

The latest strike is by flight attendants, who staged a 24-hour strike last week. Unions are saying more than 100 flights were cancelled and thousands of passengers were stranded as a result.

A spokesperson for Air France-KLM said the airline had nothing to add to its chairman's recent comments that Air France-KLM was not interested in Alitalia in its current state.

There are also reports the Italian government is reluctantly getting ready to make some of those serious changes in a last, desperate effort to restructure a more attractive package.

They may not have a choice. Officials are warning the carrier could be shut down altogether if a qualified buyer isn't found soon apparently speaking to unions that have also been instrumental in lessening the attractiveness of the deal.

If the Italian government is going to create another package, it will have to do so quickly as Air France-KLM is reported to be sniffing around Spanish airline Iberia as a potential purchase.

Stay tuned.

FMI: www.alitalia.com, www.iberia.com