Air France-KLM to buy 25% stake in Alitalia, say reports

The Air France-KLM Group, based in Paris, France, has reached an agreement to buy 25% shares of Alitalia, the flag-carrier airline of Italy, the Italian media quoted sources as revealing.

Air France-KLM reached the deal with Alitalia beating rival suitor Deutsche Lufthansa, the national airline of Germany.

The agreement must have to be approved by the boards of both Air France-KLM and Alitalia.

According to the sources whom the media quoted, Air France-KLM has agreed to pay a little over 300 million euros ($409 million) for the 25% stake in Alitalia.

The new airline will combine Air France-KLM’s Italian operations with Alitalia and Air One SpA, Italy’s second-biggest carrier. Air One was merged with Alitalia, its larger domestic rival, in December 2008, in CAI’s government-supported rescue plan for Alitalia.

As partners in the SkyTeam airline alliance, Alitalia and Air France already share services on some routes between Italy and France.

Alitalia –which has been in financial trouble for long – is headquartered in Rome, Italy, and operates services to domestic and international destinations. The airline’s hub is Leonardo da Vinci Airport in Rome. Though Malpensa International Airport in Milan, Italy, was one of Alitalia’s hubs, it has been downgraded to a focus city, with the transition completed by April 2008, leaving Rome as the airline’s only hub. Alitalia is now controlled by the Italian investment consortium called Italian Air Company (CAI).

Air France-KLM is an airline holding company incorporated under French law, with its headquarters at Roissy-Charles de Gaulle Airport near Paris, France. A member of the SkyTeam airline alliance, Air France-KLM offers a frequent flyer programme called Flying Blue. The company’s namesake airlines rely on two major hubs: Roissy-Charles de Gaulle International Airport, near Paris in France, and Schiphol Airport, near Amsterdam in the Netherlands.

The boards of Air France-KLM and Alitalia are, according to media reports, scheduled to meet on January 9, 2009, to vote on the transaction. The sources declined to give further details on the deal.

Meanwhile, the Italian media quoted Silvio Berlusconi, Prime Minister of Italy, as saying that Lufthansa “never physically came forward with an offer.”

The media had a few days quoted a spokesman at Lufthansa as saying that the Italian flag carrier was “still interested in becoming a partner of Alitalia.” Berlusconi himself had stated on November 18, 2008, that he viewed a tie-up between Alitalia and Lufthansa “very favorably.”

Roberto Colaninno, chairman of CAI, had said on December 12, 2008, that he aimed to announce a foreign partner for Alitalia by the end of 2008. But, talks were extended in order to resolve questions, including how Air France-KLM and CAI would split savings from closer cooperation as well as issues of governance of the new carrier, which was supposed to retain the name of Alitalia.