The Italian Bankruptcy

Alitalia appears more than ever en route to bankruptcy, after its proposed sale to Air France-KLM ran into political turbulence and unions insisted on having the right to re-negotiate the merger terms.

Center-right leader Silvio Berlusconi, who polls indicate is in the lead to become the next premier, has abandoned his previously neutral position and branded the Air France-KLM offer as ”arrogant and unacceptable”. He said Italian businessmen and banks should feel a ”sense of duty” to join together to buy Alitalia. According to the former premier, the offer could be led by Italy’s biggest private carrier Air One with the financial front coordinated by Banca Intesa, Italy’s number two bank, and the involvement of Berlusconi’s children, and that a buy offer could be ready “within the next three to four weeks”. Berlusconi also phoned outgoing Premier Romano Prodi urging him to approve a stop-gap or bridge loan from the state to allow time for an all-Italian offer to be drawn up and presented for Alitalia. In their phone conversation, Prodi recalled to Berlusconi that the European Union had made it clear that Alitalia could not receive fresh state aid unless the question of the carrier’s future had been resolved with a concrete offer for the Treasury’s stake.

Some observers have criticised Berlusconi for exploiting Alitalia for electoral purposes and believe that no Italian offer is on the horizon. The Treasury issued a statement on Thursday to warn against ”destroying an existing offer rather than creating a new one”.
”Anyone interested in Alitalia should step forward with a formal and concrete offer. Time is running out and cannot be dictated by political agendas,” the Treasury added. Air One, with Intesa’s backing, lost out to Air France-KLM in December as Alitalia’s preferred talking partner in exclusive negotiations for the Treasury’s 49.9% controlling stake in the national carrier. After trying and failing in court to stop the Alitalia-Air France-KLM talks, Air One promised to present a new offer. However, no such offer has been made despite the government’s assurance that all viable offers would be taken into consideration.
Intesa, meanwhile, on Thursday issued a statement to say that Alitalia was not on its agenda. According to CEO Corrado Passera, Intesa has not been involved in any bid for Alitalia since December and, in reference to Berlusconi’s statements, added ”we have never invested in something just because someone called on us to do so”.

Unions met Thursday morning with Alitalia CEO, Maurizio Prato, and reiterated their opposition to the Air France-KLM plan unless layoffs and timetables could be re-negotiated. Prato is reported to have told the unions that while there was little if any room to negotiate the Franco-Dutch offer, it was an ”industrially solid” offer and the only one on the table ”despite all the hoopla in the press”. While expressing a readiness to meet again with Air France-KLM management, even next week, the unions said this could only take place if concessions were possible. They also wanted Air France-KLM to extend its March 31 deadline for approving the merger and called on the government to extend a loan to Alitalia to allow it to continue to operate. Unions also said that they would not be swayed by threats of placing Alitalia into receivership.

This is the usual italian way of wasting taxpayers’ money: decades of state aids have just made possible a bankrupt airliner could survive, whereas politicians (both from Left and Right) and Unions wanted to keep two hubs, Milano Malpensa and Roma Fiumicino. That made additional huge losses to Alitalia. Now, Mr. Berlusconi claims he has the magic wand to save the bankrupt carrier, but his government also must be kept responsible for Alitalia crisis. Likewise, Mr. Prodi and Mr. Padoa Schioppa wasted 20 months in selling the Alitalia stake, imposing some burdensome conditions to would-be buyers, just to satisfy the Far Left and Unions constraints. No wonder now Air France-KLM can offer such a tiny amount to make the deal. It’s the same old story: Italy is the hostage of special interests, and the political system acts as a broker, cashing in public money. The Alitalia bankruptcy is a metaphor for the next Italian bankruptcy, unless politicians make a U-turn in the way they manage the country.

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