Air France sets tough rules for loss-making partner Alitalia

Published on : Monday, November 4, 2013

klm AirlinesTough conditions have been set by Air France-KLM (AIRF.PA) with 5,000 job cuts and for investing more money in loss-making Italian airline Alitalia.

 

 

Air France-KLM being Alitalia’s biggest shareholder with a 25 percent stake, had dictated its conditions to Italian Transport Minister Maurizio Lupi  about ten years ago. It was said by news souces that two sides were locked in a tug-of-war.

 

 

Air France-KLM’s wanted the removal of the board of directors of Alitalia and also it demanded a restructuring of its debts of nearly 1 billion euros ($1.35 billion) to reduce them by 70 to 80 percent.

 

 

The 5,000 job cuts would be more than double what Alitalia’s CEO Gabriele del Torchio has penciled in as part of a revised restructuring plan to keep it in business said a news source.

 

It is said that Air France-KLM while still in the middle of its restructuring had demanded for many job cuts but the figure was given as being less than 5,000.

 

There were no comments from the Franco-Dutch airline and no one from Lupi available for comment.

 

Air France-KLM gave its approval to a 300 million euros capital increase in the ailing Italian national carrier along with Alitalia’s other investors, but is not obliged to participate and has always said it would attach strict conditions before giving any help.

 

Part of a wider bailout, the cash call is seen as only a stopgap solution before talks on a possible tie-up between Alitalia and Air France-KLM, although Lupi has said Italy would seek a different international partner if Air France-KLM does not subscribe to the capital increase.

 

On Thursday, Air France wrote off the value of its stake in Alitalia, which has not made a profit for more than a decade. Its Chief Executive, Alexandre de Juniac, said in a news conference that conditions for any agreement included a deal on medium-haul and long-haul networks, “social mechanisms” and “financially, a very strong restructuring.”The shareholders of Alitalia’s have still got time until mid-November to announce whether they will take part in the capital increase.

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