As the year came to a close, takeover bids for two of Europe's largest flag carriers reached important milestones

After nearly a decade of stop-start efforts to privatise its flag carrier, the Italian government appears as close as it has ever come to finding a suitable partner for troubled Alitalia. The two leading suitors, both of which have submitted non-binding bids to acquire the carrier, are Air France-KLM and AP Holding, the parent of Italian carrier Air One.

The Air France-KLM proposal stresses the growth potential of Alitalia at its Rome Fiumicino hub, which would be developed along the same lines as it has built Amsterdam Schiphol and Paris Charles de Gaulle airports. It will also build up medium- and long-haul services at Milan Malpensa airport to suit business travellers.

According to its chairman Jean-Cyril Spinetta, this would be another major step in European consolidation, and critically it "would also meet the requirements for the Group's economic and financial stability, including its target of a return on capital employed after tax of 8.5% by the end of fiscal 2009/2010".

AP Holding's plan is to concentrate leisure services at Rome and business services at Milan including the removal of duplicating routes. The carrier operates a fleet of around 40 narrowbodies on routes within Italy and to European destinations. It plans to cut 3,700 staff from Alitalia's 11,000-strong workforce.

Since 2000, Alitalia has seen a string of chief executives and business plans tasked with restoring its fortunes, but none has been radical enough to lower the airline's cost base and headcount. Over the past decade it has consistently lost money, only making a net profit in three out of the last 11 years (see table).

As the long running saga over Alitalia's future rumbles on, the takeover manoeuvres at Spanish flag carrier Iberia have taken several twists and turns over the past month or two.

British Airways and US private equity group TPG have abandoned their takeover bid for the carrier. Spanish banking group Caja Madrid has meanwhile raised its stake in Iberia to 23%. With Spanish government elections due in March the activity over Iberia is expected by some to subside until the political climate is clearer.

Both groups interested in Alitalia stress how to grow the business

Alitalia timeline

December 1997

Alitalia signs commercial pact with KLM

May 2000

Alliance with KLM breaks down

July 2001

Alitalia invited to join SkyTeam

July 2001

Air France signs commercial pact with Alitalia

January 2003

Air France and Alitalia take 2% stakes in each other

April 2004

EC approves wide-ranging joint venture with Air France on routes between France and Italy


Net loss tops $1 billion in 2004

June 2005

EC approves €1.2 billion in state aid for Alitalia

December 2005

Raises $1.2 billion in capital increase, state cuts stake to 49.9%

January 2007

Potential bidders line up, including Air One and Texas Pacific, but not Air France-KLM

August 2007

Alitalia plans to focus on Rome hub and ease back at Milan

December 2007

Air France-KLM and Air One parent AP Holding in final running for Alitalia

Source: Airline Business