Tuesday, October 08, 2013

Alitalia risks bankruptcy without capital increase -source

* Government and Alitalia held talks Tuesday, no solution yet

* Alitalia needs 500 mln euros - analysts

* Aviation authority seeks meeting with company

ROME, Oct 8 (Reuters) - Loss-making Italian airline Alitalia risks having to file for bankruptcy if it fails to agree a deal for a capital increase in the next couple of weeks, a government source said on Tuesday.

Alitalia needs about 500 million euros ($680 million) to stay in business and invest in a new turnaround strategy, analysts have said, after accumulating losses of more than 1 billion euros and debt of a similar size since being rescued from bankruptcy in 2009.

Its shareholders, a disparate group of 21 Italian investors including bank Intesa Sanpaolo and road operator Atlantia, will vote on a capital increase of at least 100 million euros on Oct. 14 to keep the business running as it seeks fresh bank financing and a longer-term solution to its financial plight.

"Alitalia risks filing for bankruptcy if no solution on the capital increase is found in a couple of weeks," the source told Reuters.

The airline has also fallen behind in its payments for fuel, suppliers have said, and could face the prospect of having to ground its fleet.

"In four or five days Alitalia risks not being able to fly," the government source added.

The company said on Sept. 26 that it had total available cash of 128 million euros, including unused credit facilities.

Such a sum would not last long. Andrea Giuricin, a transport analyst at Milan's Bicocca University, estimates that Alitalia needs at least 10 million euros a day to keep its aircraft flying and has annual operating costs of at least 3.7 billion euros.

An Alitalia spokeswoman was not immediately available to comment.

Concern over Alitalia's finances is such that civil aviation authority ENAC will summon representatives from the company in the next few days to assess its business prospects, a source close to the situation said on Tuesday.


Italy's government and Alitalia shareholders have been betting on Air France-KLM raising its stake from 25 percent and possibly even taking control of the group, but there remain disagreements over financial commitments and business strategy.

A meeting between government and Alitalia management on Tuesday finished without a solution, while a separate Alitalia board meeting was ongoing. "We are working on it, there are various ideas, but there is no solution yet," Transport Minister Maurizio Lupi said.

Alitalia's new CEO Gabriele Del Torchio is pinning turnaround hopes on the more lucrative long-haul market after the company's attempt to become a strong regional player was scuppered by aggressive competition from low-cost carriers Ryanair and easyJet.

The chief executive of Air France-KLM has indicated that the two airlines could complement each other in the long-haul segment and that his company values Alitalia's presence in Europe's fourth-largest travel market.

"Alitalia is an important partner. If it leaves the Skyteam alliance, the loss of revenues for Air France-KLM could reach 100 million euros a year," Kepler Cheuvreux analyst Pierre Boucheny said, adding that he expects the group to back Alitalia only if it is guaranteed control of strategy.

However, the Italian side is determined not to sell too cheaply.

"This is a tug of war over the price," said transport analyst Giuricin. "Air France-KLM would like to buy Alitalia as cheaply as possible, preferably without having to take on its debt, while the Italian shareholders want to get something out of this as well."

The Italians will also take some convincing before giving up their say on company strategy, with the government considering Alitalia to be a key national asset that employs 14,000 people.

Alitalia shareholder and Deputy Chairman Salvatore Mancuso was quoted on Monday saying he was not in favour of a takeover by Air France-KLM, citing the risk of significant job cuts and a deep restructuring.

Rome has been looking for a public entity that could invest 100 million euros before a tie-up with a partner, sources said, although Transport Minister Lupi denied that the state had asked railway group Ferrovie dello Stato to buy into Alitalia.


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