Air France-KLM offered to buy Alitalia on Thursday after a year of apparent indifference, setting up a showdown with tiny Italian airline Air One for the money-losing Italian carrier. The winning bidder for Alitalia, which loses €1million a day, would take on an airline beset with strike-prone unions, inefficiency and political interference. It has been on the block for about a year.
Germany's Lufthansa walked away from the sale of the Italian state's 49.9 per cent stake ahead of Thursday's deadline for non-binding offers, saying an offer could have put its investment-grade debt rating at risk.
A little-known group led by Italian lawyer Antonio Baldassarre also presented an offer, which Alitalia said it would evaluate despite previously ruling out the group for failing to show it had the necessary financial muscle.
"Alitalia is unprofitable, it is a liability, but for an airline like Air France it also means they can add to their network, routes and slots," said Diogenis Papiomytis, aviation consultant with Frost & Sullivan. "By buying Alitalia, you're buying a set of routes around the world."
Alitalia said it would likely identify a bidder for exclusive talks next week.
The bids leave Italy's fragile centre-left government with two vastly different options in Air One and Air France-KLM, each with problems of their own.
An Air One takeover would keep Alitalia in Italian hands, but there has been doubt over whether the smaller airline has the ability to turn around an airline with a long list of woes. The Air France-KLM choice would make Alitalia part of the world's biggest airline by sales but at a sharp discount to its share price with the possibility of job cuts.
The Franco-Dutch airline's proposal will be well below Alitalia's market value of €1.1 billion, a source familiar with the matter said. Air France-KLM has emphasised it would not do a deal that would dent its profitability.
Shares in the Italian airline jumped more than six per cent to a one-month high after Air France-KLM said it was sending a nonbinding letter of interest to the company's board, before closing up nearly three per cent at €0.87.
The stock had tumbled nine per cent last month on fears that Alitalia, which has about €1.2 billion in debt, would attract only Air One, and the sale would be delayed to next year. Air One said it would invest €4 billion in Alitalia, mainly to renew its aging fleet. Under its plan, the airline would maintain twin hubs in Rome and Milan, and aimed to break even by 2009 with a profit the following year.