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 signs commercial pact with KLM
Alliance with KLM breaks down
Alitalia invited to join SkyTeam
Air France signs commercial pact with Alitalia
Air France and Alitalia take 2% stakes in each other
EC approves wide-ranging joint venture with Air France on routes between France and Italy
Net loss tops $1 billion in 2004
EC approves €1.2 billion in state aid for Alitalia
Raises $1.2 billion in capital increase, state cuts stake to 49.9%
Potential bidders line up, including Air One and Texas Pacific, but not Air France-KLM
Alitalia plans to focus on Rome hub and ease back at Milan
Air France-KLM and Air One parent AP Holding in final running for Alitalia
Source: Airline Business