As Alitalia seeks more time to finalise its future relationship with Meridiana, the Italian flag carrier has received indications that Brussels is moving forward on approving its joint venture with Air France, but with conditions attached.

Alitalia's attempt to find an Italian partner to develop its own low-cost airline project needs more time. After deciding earlier this year to work with an outside carrier, rather than establish its own low-fare division, Alitalia says that its exclusive talks with Meridiana have been extended until 30 September.

Alitalia entered talks with the Sardinia-based carrier, which is majority owned by the Aga Khan, in March. In a statement, it said the carrier's board had "approved the positive developments of the negotiations under way with Meridiana...these negotiations are aimed at defining ways of integrating the airline into the Alitalia Group. The details, timing and terms of the operation will be established at a later date, following completion of further studies still to be carried out."

With Alitalia's 55% domestic market share and the 15% of Meridiana, the combination of the two will form a dominant force in Italy, and as such raises antitrust questions, says David Jarach, professor of air transport marketing at SDA Bocconi University in Milan. However, there are some 30 Italian domestic carriers in the market and around 25-30% overcapacity, spurring an urgent need for consolidation, he argues. "The deal will only work if Alitalia conducts a total integration of Meridiana," he says. Meridiana's network concentrates on serving Sardinia, as well as a hub at Florence, with a fleet of four BAe 146 and 17 MD-80 jets.

As Alitalia tries to reach acceptable terms with Meridiana, which has been up for sale several times during the past five years, the European Commission (EC) said that some progress had been made towards clearing the proposed joint venture between Alitalia and its SkyTeam partner Air France on routes between the two countries. In mid-2002 the EC expressed serious doubts about the competition effects of the alliance on routes like Paris-Rome and Milan, and between Milan and Lyon, saying that they needed to be addressed or consumers on these and other routes would be harmed.

EasyJet, which is building up a hub at Paris Orly, has called for the two flag carriers to hand over 35,000 slots per year at Orly and Charles de Gaulle to "guarantee that meaningful competition exists between France and Italy once an alliance is approved". It says the two carriers account for 82% of the capacity on the top 10 routes from Paris to Italy.

It argues that assuming the two carriers should not represent over 50% of the future market, then slots for a total of 120 daily return flights should be made available. This equates to 47 return flights per day or 35,000 slots per year.

An EC spokeswoman stressed that Competition Commissioner Mario Monti looked favourably on the consolidation of the airline sector as has been demonstrated by the number of alliances already reviewed and cleared by the EC albeit with conditions, in some cases, such as the Lufthansa-Austrian Airlines tie-up. Monti was optimistic that a solution would also be found in the Alitalia/Air France case, she said. Although the EC has had regular contacts with both carriers, and that it had an internal deadline to clear the deal, it preferred to keep those deadlines confidential.


Source: Airline Business