Barely having caught their breath after the furious scramble to take over insolvent Air Liberté, potential bidders are now lining up in the race for struggling French rival, AOM.

And potential political problems are already brewing. British Airways' recent acquisition of a 67 per cent holding in Air Liberté (French banking group Rivaud holds the remainder)has heightened the French government's determination that AOM remain in French hands. But consultant Bertrand d'Yvoire of Consultair predicts a conflict of interests will result if a foreign carrier makes the highest bid for the carrier, valued at FFr 1,200 million (US$230 million).

BA admits that it is 'getting strong vibes that a French solution is the preferred option'. This is not surprising: if BA acquired AOMit would give the UK carrier some 35-40 per cent of slots at Paris/Orly, when combined with French subsidiaries TAT and Air Liberté.

But in trying to find one French solution, AOM's chairman, Alexandre Couvelaire, sparked a row with AOM's other board members; they rejected his plans for a management buyout.

AOM's preferred option now appears to be Air France. The French flag carrier is now in a position to make an offer, following the lifting of state aid restrictions on 31 December 1996. One source suggests the carriers were keeping a lid on the deal in late 1996, waiting for this deadline to expire.

Indeed, the French flag carrier appears to be back on a sounder financial footing. Air France's first half results to 30 September produced a net profit of FFr802 million ($156.5 million), against a FFr335 million net loss in the first half a year earlier. Debt levels has come down from FFr19.2 billion to FFr12.9 billion. The carrier is also due to start negotiations with unions in early 1997 over a new 'competitive growth plan'.

Another potential French bidder for AOMis tour operator Nouvelles Frontières, which is set to make a bid with Royal Air Maroc for a 15 per cent stake each, with two or more additional partners. 'We have yet to make a bid for AOMbut the intention is there. RAM's strategy is to be present in the European market and look for partners to create synergies,' explains RAM's finance director, Ahmed Ammor.

RAM had already failed in an earlier bid for Air Liberté. Ammor explains RAM withdrew from a combined bid for Air Liberté made with Nouvelles Frontières and Rivaud, when an analysis of Air Liberté's accounts revealed that 'losses and debts were too high to buy it'. But one French source suggests that the reason behind the withdrawal from the bid was a dispute over the division of stakes between the partners. RAM was unhappy with the 'meagre' stake it was being offered, while Rivaud refused to take more than a 35 per cent stake. The disagreement pushed Rivaud into the hands of BA.

Meanwhile, Virgin Express, which had also bid for Air Liberté, is refusing to comment on whether it will move for AOM. Chief executive Jonathan Ornstein skirted the issue and also quashed rumours of Virgin taking over Sabena's Brussels-Paris service in addition to the Brussels-London/Heathrow operation. Ornstein hints, however, that he is working with Sabena on further cooperation, maybe in the form of a franchise arrangement, elsewhere in the UK. Sabena was due to start providing ground handling and catering services to Virgin Express in Brussels from January 1997.


Source: Airline Business