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Air France-KLM won't subscribe to Alitalia capital increase

French-Dutch carrier says Italian business plan not adequate

14 November, 13:46
Air France-KLM won't subscribe to Alitalia capital increase (updates previous) (ANSA) - Rome November 14 - Air France-KLM on Thursday announced it will not participate in a 300-million euro capital increase for Alitalia.

The move comes after the French-Dutch carrier voted against a restructuring plan passed by Alitalia's board on Wednesday.

Air France-KLM praised Alitalia's progress on operating performance, service and cost control, but said the new industrial plan does not go far enough to reduce Alitalia's towering debt.

Air France-KLM is the Italian airline's largest shareholder with a 25% stake.

Alitalia's revised industrial plan includes deep cost reductions, efficiency gains, and other measures to beef up competitiveness.

Sources told ANSA the plan foresees 200 million euros in spending cuts and 2,000 layoffs, half of those coming from expiring work contracts.

Air France-KLM said it was not enough.

"Even if the industrial component of the new plan presented yesterday by Alitalia is a step in the right direction and is receiving Air France-KLM's full support, the necessary financial restructuring measures are still not yet met," Thursday's statement said.

The French-Dutch stakeholder reportedly also disapproved of the plan to slash domestic flights and increase international and intercontinental flights, a source told ANSA.

Air France-KLM said it remains committed to its eight-year partnership with Alitalia signed in 2009.

The airline group also intends to convert Alitalia bonds to reinforce its equity, a move it said would also offset dilution of Air France-KLM's stake in Alitalia after the capital increase and "keep the strong relationship between the airlines".

Last month, Alitalia's board approved a 500-million-euro budget package that included the 300-million-euro capital increase and 200 million euros in new lines of credit.

So far, Alitalia has gathered subscriptions for 136 million euros - less than half of the stated goal.

The Italian airlines board on Wednesday also voted to extend the participation deadline to November 27, saying it wanted to give shareholders time to reflect on the new industrial plan.

Sources told ANSA the new deadline was also set to follow a shareholder assembly of Poste Italiane on November 20.

Last month, the Italian postal company agreed to underwrite the capital increase to the tune of 75 million euros, while Italian banks Intesa Sanpaolo and UniCredit said they would put in up to a maximum of 100 million euros.

But meanwhile the search for another possible international partner continues, with possible candidates rumored to be Air China, Etihad and Aeroflot.

While Aeroflot made no comment, sources say the Russian airline views its market and that of Alitalia as complementary, but only if the Italian airline puts a satisfactory restructuring plan in place.

Italian Transport Minister Maurizio Lupi responded to the industrial plan saying the defense of jobs was a government priority.

Unions are expected to meet, perhaps as soon as Friday, to prepare their response to the new plan.

Trade union CGIL leader Susanna Camusso warned that if Alitalia attempts major layoffs, CGIL's response will be "very hard".