Air France-KLM in Takeover Talks with Alitalia

24 November 2006

MILAN: Europe's largest airline Air France-KLM, formed in May 2004 by the merger of the French and Dutch national carriers, is in acquisition talks with Italian rival Alitalia.

In its present condition, Alitalia is something of an overripe plum, unworthy of plucking. Immersed in red ink since 1998 and beset by labor problems, it posted a loss of €257 million ($355.52m; £185.5m) in the first nine months of this year, although executives claim it will make a profit in the final quarter.

Emergence from the red, says AF-KLM ceo Jean-Cyril Spinetta, is a necessary precondition for continuation of the talks with Alitalia. The Franco-Dutch partners own melding is judged an unqualified success after reaching an accord with the respective unions.

Repeating that success could be a Sisyphean task with Alitalia, the Italian unions being more than a little leery at the prospect of takeover by their Gallic neighbors.

Says Antonio Amoroso, coordinator of Confederazione Unitaria di Base, a union representing around 700 Alitalia workers: "We don't want a situation where the Italian government bends to every French demand.

"We have nothing against a deal with Air France, but Alitalia is in a difficult financial position right now and to go into an alliance in this condition would mean accepting tough conditions from the French."

Should a deal eventually be struck it would create the globe's largest airline by any criterion. AF-KLM is already the biggest such company in the world in terms of total operating revenues, and the third in terms of passenger-kilometers flown.

Data sourced from New York Times; additional content by WARC staff