c.2013 New York Times News Service
c.2013 New York Times News Service
PARIS — The chief executive of Air France-KLM, the largest foreign shareholder in Alitalia, said Wednesday that he had not ruled out the possibility of participating in a fresh bailout of the struggling Italian flagship carrier as it scrambles to produce a plan to shore up its dwindling cash reserves.
But given the weak financial position of the French-Dutch group, which owns 25 percent of Alitalia, any assistance would be subject to strict conditions, he said.
“We have to be extremely vigilant,” the executive, Alexandre de Juniac, told the French business daily Les Echos in an interview. “If the right conditions are met, I am prepared to go ahead.”
de Juniac did not elaborate on those conditions, but his remarks came as Alitalia’s top management met for a second day with its bankers, shareholders and senior Italian government ministers to discuss a plan to inject fresh capital into the debt-laden airline, which continues to post losses five years after Air France-KLM and a consortium of Italian companies rescued it from bankruptcy.
Those discussions have taken on a sense of urgency in recent days. Alitalia last week reported that its net loss had widened to 294 million euros, or $398 million, in the six months that ended June 30, compared with 201 million euros in the same period a year earlier. Revenue slipped by 4 percent to 1.62 billion euros. Its net debt stood at 946 million euros, up from 862 million euros a year ago, while its available cash flow was down to a precarious 128 million euros from 159 million euros at the end of March.
Alitalia’s management is seeking an injection of at least 100 million euros from existing shareholders in exchange for new shares, as well as a syndicated shareholder loan of 55 million euros that would be convertible into shares.
Alitalia is also negotiating with a consortium of banks, including Intesa Sanpaolo and UniCredit, for a fresh 300 million euro line of credit to help fund current operations, said two people with knowledge of the discussions.
But Air France-KLM, which holds four seats on Alitalia’s 19-member board, has not acquiesced to that plan, which is subject to a board vote on Oct. 14. Air France-KLM is seeking more aggressive efforts by the Italian carrier to reduce its debt, said the people, who spoke on condition of anonymity because the talks were still under way.
An Air France-KLM spokesman declined to comment on whether the group would accept a dilution of its Alitalia stake if it chooses not to participate in the capital increase. Alitalia representatives also would not comment.
Alitalia in July outlined a restructuring program aimed at restoring it to profitability by 2016 that involves transferring a larger share of its domestic and European services to its low-cost subsidiary, Air One, to better compete with foreign rivals like Ryanair and EasyJet. Alitalia also envisions an expansion of its long-distance services out of Rome, Milan and Venice, a plan that would mean adding more expensive, wide-body jets to its fleet.
Air France-KLM is opposed to this strategy, said one person close to the discussions, for fear that any expansion of long-distance services at this stage would only prolong Alitalia’s losses and distract it from the more pressing issue of its debt burden.
Air France-KLM would like to maintain the Italian foothold that its partnership with Alitalia has brought as it seeks to return to profitability by 2015. But de Juniac has little room to maneuver as his group wrestles with a costly restructuring of its own, which will involve the shedding of up to 450 million euros in costs and 7,900 jobs at its Air France unit by the end of next year.
Air France-KLM joined with a consortium of leading Italian companies, including the tire maker Pirelli and the oil company Eni to rescue Alitalia, which was then state-owned, from bankruptcy in 2008. As part of the deal, which privatized Alitalia, the French carrier paid 323 million euros for a 25 percent stake, while other shareholders paid more than 1 billion euros in cash in exchange for shares, which they were barred from selling for five years.
The grinding economic slump has left some of Alitalia’s Italian shareholders short of cash and eager to divest their holdings in the airline when those restrictions are lifted at the end of October — adding to the pressure on Alitalia to find a solution.