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The latest chapter in the saga of troubled Alitalia appears to be nearing completion after the Italian flag carrier and Air France-KLM on Tuesday announced a "new strategic partnership." Subject to approvals by Alitalia shareholders and competition authorities, Air France-KLM would take a 25 percent stake and create joint ventures covering services between Italy, France and the Netherlands. The deal was announced on the same day Alitalia officially relaunched after it combined with domestic rival Air One.
If approved, the Air France-KLM deal would remove uncertainty surrounding the future of Alitalia, a chronically money-losing airline that in 2008 came dangerously close to complete collapse, by shoring up the finances of the primary player in the commercial travel sector within Italy--a prominent locale in the global travel market. It also would keep Alitalia in the SkyTeam alliance and out of Lufthansa's growing sphere of influence. The German carrier also had pursued a tie-up with Alitalia and continues to have designs on the Italian market.
Air France-KLM and Alitalia said they would create "a unique combination of hubs from north to southern Europe," including Amsterdam Schiphol and Paris Charles de Gaulle airports in the existing Air France-KLM network and Alitalia operations at Rome Fiumicino and Milan Malpensa airports.
The partnership also would provide Air France a greater presence within Italy, following Alitalia's consolidation with Air One. Both Alitalia and Air One had ownership transferred to investment consortia Compagnia Aerea Italiana. In all, the "new" Alitalia flies to 70 destinations, including 23 within Italy.
For multinational travel buyers, Alitalia's renewal has several ramifications. For starters, it keeps alive a large international airline that provides the most lift in the key business centers of Milan and Rome. It also provides opportunities for pan-European airline deals via linkages with Air France-KLM and other SkyTeam members. However, closer ties between Alitalia and Air France-KLM could mean reduced competition, higher fares and less favorable discounts on routes between Italy and both France and the Netherlands.
The partnership falls well short of the cross-border merger proposed by Air France-KLMin March 2008. That proposal crumbled within weeks when Alitalia's labor unions rejected certain aspects of the Air France-KLM framework. By summer 2008, Alitalia declared bankruptcyand was barely able to continue operating.
Now, Alitalia and Air France-KLM expect to generate within a few years €90 million (US$121 million) in annual synergies through the joint ventures, network optimization and cooperative revenue management. As part of the transaction, Air France-KLM "will subscribe to a reserved capital increase for an amount of some €323 million (US$433 million)." Air France-KLM would gain three seats on Alitalia's 19-member board and two seats on Alitalia's nine-member executive committee.
"In view of the numerous challenges facing our sector, cooperation between airlines is becoming increasingly necessary, and this partnership represents an important milestone," according to an Air France-KLM statement.
The companies expect regulatory approval from "various competition authorities, including the European Union ... before the end of the first quarter of 2009."
Meanwhile, Lufthansa appears intent on offering intra-Italy flights, including service between Milan and Rome, according to Italian media outlet AGI. The German airline in November introduced the Lufthansa Italia brand, with plans to begin next month flights between Milan and both Barcelona and Paris CDG. Its Milan services would be augmented in March with flights to and from Brussels, Budapest, Bucharest, Lisbon, London Heathrow and Madrid.
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