Air France-KLM Breaks off Talks to Buy Alitalia; Chairman of Italian Airline Resigns
03.04.2008 (12:19) | Internaitional Herald Tribune
Air France-KLM broke off talks Wednesday to buy Alitalia, saying unions would not allow it to quickly return the ailing carrier to profitability and dealing a setback to the Italian government's effort to sell before the company runs out of cash.Meanwhile, Alitalia's chairman, Maurizio Prato, who led the effort to find a buyer, resigned, and the Italian carrier said that with the collapse of talks, the approval it gave last month to Air France-KLM's offer no longer held. Alitalia plans to call an extraordinary board meeting Thursday to decide its next move.
Air France-KLM said it regretted the breakdown in talks, but conditions did not exist for further negotiations.
The French-Dutch carrier abandoned talks after rejecting union demands to maintain Alitalia's 51 percent stake in its troubled ground service unit, speed up plans to buy new planes and keep its cargo unit open in coming years, union sources said.
Air France-KLM had made union support a condition for wrapping up the deal, and Alitalia has said any further delays in talks would worsen its already precarious finances.
"No restructuring plan in the airline business has ever succeeded without the backing of the workers," Air France-KLM said in a statement. "After long negotiations, the unions today came up with a new proposal that is completely different" for that of the French-Dutch company, the statement said.
Air France-KLM notes "with regret that the conditions to continue the negotiations no longer exist," the company said.
In buying Alitalia, Air France-KLM would have won access to one of Europe's biggest passenger markets, while inheriting an airline that is losing more than €1 million, or $1.6 million a day. It has not had an operating profit in almost a decade and has had nine government-appointed chief executives in the past 15 years.
But both Air France-KLM and union officials made statements that appeared to leave the door open to a return to talks.
The Air France-KLM statement quoted Air France-KLM's chairman, Jean-Cyril Spinetta, as saying that the breakoff "didn't depend on us. It was a plan in which I deeply believed and in which I continue to believe because it would have allowed Alitalia to rapidly find the path" to a comeback.
Fabio Berti, the leader of the pilots union Anpac, told Sky TV that Spinetta walked out of talks after he "brusquely replied that he didn't have the mandate" to negotiate on the proposal made by the unions during Wednesday's session.
Italian unions involved in the talks held out some hopes a deal could be salvaged. They have scheduled a news conference in Rome for Thursday afternoon. If Spinetta "examines our proposal calmly, he'll find that it's not unreasonable," Andrea Cavola, a union leader, told Sky television.
Air France-KLM made a binding offer valuing the airline at €139 million, or $216 million, far less than expected. Unions are worried about 2,100 planned layoffs among the 11,000-strong work force.
Italy's economy minister, Tommaso Padoa-Schioppa,overseeing Alitalia's sale had warned earlier Wednesday that its only alternative to the deal was emergency administration, during which an administrator is put in charge and decides whether the company can be restored to health or must shut operations.
Padoa-Schioppa earlier had ruled out a bid for the airline by private Italian businessmen, calling it "impossible" and not a solution for an airline in need of deep restructuring.
"If the Air France-KLM offer falls apart, we would be left without the only takeover offer," Padoa-Schioppa told a parliamentary hearing on Alitalia, which has exploded into a top issue before Italy's April 13-14 general election.
"It would be bitter destiny if the company, dragged down for years because of a perverse relationship with politics, got its mortal blow from exploitation for election purposes or from the lack of a deal with unions."
Though it was approved by the outgoing government selling the Italian state's 49.9 percent stake in the carrier, the takeover came under a maelstrom of criticism from Milan's airport operator and opposition leader Silvio Berlusconi.
Politicians, campaigning for the election and opposed to the deal because it would maintain fewer operations at Milan's main airport, Malpensa, rejoiced at the news that the talks broke down.
"News that Air France has abandoned the talks, hopefully for good, is very positive - that deal was neither positive for Alitalia nor for Malpensa," said Roberto Maroni, a Northern League leader and a Berlusconi ally.
Alitalia's fate will rest with Italy's next government. The former prime minister, Silvio Berlusconi, criticized the Air France bid and said he would seek to put together an offer from Italian investors. The carrier might not be able to wait that long. Alitalia had less than €200 million in cash and credit available at the end of March.
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