Will Sell Controlling Stake In Airline

There's another airline coming up for sale. The Italian government said Friday it will sell a controlling stake in troubled national flag carrier Alitalia.

Agence-France Presse reports the government now has a 49.9 percent interest in the airline, and is looking to cut that to less than 30 percent.

"The decision was taken in accordance with intentions to seek strategic international alliances, with a possible final decision regarding Alitalia's future to be taken by January 2007," the government said in a statement Friday, adding the sale would be carried out through "a competitive procedure and direct negotiations."

Alitalia is plagued by mounting debt and a volatile relationship with its workers. As Aero-News reported, two aircraft were sabotaged in October, one day before talks between management and labor were to resume... not an uncommon occurrence, according to the London Times.

The airline is expected to lose $400 million this year alone. Ahead of this week's announcement, shares in Alitalia entered unfamiliar territory -- gaining almost two percent, before trading was suspended.

Alitalia CEO Giancarlo Cimoli told lawmakers the future of Alitalia depends on forming an alliance with an international group... and the airline has entered into preliminary talks with Air France-KLM.

"The only strategic direction for Alitalia is to integrate itself in a big international group," Cimoli said. "The board has given me a mandate to explore (possible alliances.)"

The two carriers have exchanged shares in each of their companies, but there's a potential snag. Cimoli said Air France-KLM would insist on reorganizing Alitalia... a move that would likely leave the carrier a shell of its former self.

But that may be what it takes for Alitalia, in whatever form, to survive.

"Only a significant change of size can allow Alitalia to consolidate its position" in the market, Cimoli said.

FMI: www.alitalia.com