Former CEO Says "Only An Exorcist" Can Save Airline
Talk about cutting off one's nose, to spite their face. The
controversial -- but, in the eyes of many analysts and investors,
absolutely necessary -- sale of Italian flag carrier Alitalia
appears to be dead in the water Thursday, after new demands from
the beleaguered airline's unions sent negotiators from Air
According to numerous news reports, those unions introduced
11th-hour proposal calling for the buyers to save jobs at
Alitalia... a condition Air France-KLM reportedly found
Current Italian prime minister Romano Prodi said unions made "a
grave mistake" with those demands, reports The International Herald
Tribune... and Italy's Economy Minister told parliament the only
alternative may be 'emergency administration,' otherwise known as
"I regretfully acknowledge the breakdown in negotiations, which
is none of our doing," Air France chairman Jean-Cyril Spinetta
pointedly told the media. "This is a project I have profoundly
believed in and continue to do so, because it would have ensured
Alitalia a rapid return to profitable growth."
The board at Alitalia
held emergency meetings Thursday to discuss ways to bring Air
France-KLM back to the table... but few expect the board to find a
"I think it is pretty much over," JP Morgan analyst Chris Avery
told Reuters. "There are too many unions involved, there is an
imminent election and there does not appear to be a viable,
concrete alternative proposal out there. I can't see how this can
As ANN reported last month,
the Alitalia board accepted a $1.17 billion takeover offer from Air
France-KLM on March 16. The takeover followed several attempts by
the Italian government to sell off its stake in the troubled
airline, including a failed auction involving just two bidders, Air
France-KLM and rival Italian carrier Air One.
The subsequent French takeover -- described as "hard to digest"
in one Italian editorial, and "a painful yes" -- worked out to one
share in Air France/KLM for every 160 shares in Alitalia... a
valuation of .10 euro per share in the Italian airline, or an 80
percent discount from Alitalia's closing stock price two days
Also casting a pall on the future of Alitalia was Wednesday's
sudden resignation of the carrier's CEO, Maurizio Prato, who was a
fierce proponent of the Air France takeover. Following the unions'
new demands, Prato left in frustration... reportedly calling
Alitalia "cursed," adding "only an exorcist" could save it.
He may be right.
"Following the collapse in the negotiations between AF-KLM and
Alitalia, a result of unions' opposition to the proposed
restructuring plan and the political cost of the privatization
prior to the Italian elections, the future for Alitalia is
uncertain and it could be argued that the only option now is
bankruptcy," said Frost & Sullivan commercial aviation analyst
Diogenis Papiomytis. "The alternative would be for either Air One
or a new investor to prepare a restructuring plan and bid for the
carrier as soon as a new Finance minister is in position after the
"However, with the ongoing global credit crisis, it is uncertain
whether any investor can finance Alitalia's takeover and
restructuring through debt," Papiomytis added. "In the meantime,
Alitalia's short-term liabilities will put further pressure on a
already negative climate."
Perhaps realizing they may have overplayed their hand,
Alitalia's unions put on concessionary faces Thursday, going to the
media with their view the government should hold off on any final
decision on Alitalia's future until new parliamentary elections are
held April 13 and 14. But many believe it's already too late.