Air France-KLM Said to Call Board Meeting on Alitalia Takeover

Air France-KLM Group (AF)’s board will meet Sept. 23 to decide whether to bid for control of Alitalia SpA as a lock-up period requiring transactions to be approved by the Italian company ends, a person familiar with the plan said.

Air France already owns 25 percent of Alitalia bought for 323 million euros ($438 million) in 2009 and has resolved to decide whether to boost the holding by the year’s end. The Italian company’s board, which loses its veto over investments on Oct. 28, will meet Sept. 26 to study plans to raise cash that might entail a capital increase involving Air France, a second person said. Both asked not to be named since talks are private.

For Air France-KLM, already Alitalia’s biggest shareholder, taking full control of its Skyteam alliance partner would help lock in access to one of Europe’s largest aviation markets. Counting against a purchase are the Italian company’s mounting losses and Air France’s focus on reviving short-haul operations, which might make a deal involving a third-party such as Abu Dhabi-based Etihad Airways PJSC more likely, according to Donal O’Neill, an aviation analyst at Goodbody Stockbrokers in Dublin.

“There would be some sense in Air France looking to increase their holding together with Etihad,” said O’Neill, who has a “hold” rating on Air France-KLM, Europe’s biggest airline. “Air France by itself isn’t exactly flush with cash at the moment and Etihad has aspirations to grow in Europe.”

Asian Links

Air France-KLM spokesman Cedric Leurquin declined to comment on Alitalia and said he couldn’t immediately confirm the date of the next board meeting. A representative of Rome-based Alitalia, where losses quadrupled to 280 million euros in 2012, declined to comment.

Etihad, the third-biggest Gulf carrier, has been an ally of Air France since a pact in 2012, and may be a potential Alitalia investor after taking stakes in European operators including Air Berlin Plc (AB1) and Aer Lingus Group Plc. A tie-up would enhance Italy’s connections with Asia via Abu Dhabi, complementing links to the west through Air France-KLM bases in Paris and Amsterdam.

Italy’s infrastructure and transport minister, Maurizio Lupi, will also meet with his French counterpart on Sept. 26 to discuss the situation, he said yesterday at an event in Rome.

“I’ll meet the French minister and I’ll be clear about the fact that Alitalia is a strategic asset for our country and that finding an international partner is essential,” Lupi said.

Alitalia’s board meeting the same day will review feedback from its banking adviser on plans to raise at least 300 million euros in fresh financing before the end of the year, with the amount of new equity involved yet to be determined, one of the people said.

Air France-KLM’s French division yesterday met with its central employee committee to discuss plans to end losses in its short-haul and cargo businesses, laying the groundwork for fresh measures including a possible 2,800 job cuts.

To contact the reporters on this story: Andrea Rothman in Paris at aerothman@bloomberg.net; Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net

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