Italy Said to Seek State Funds to Ease Alitalia-Air France Deal

Italian Prime Minister Enrico Letta is pushing for a state-controlled company to invest in Alitalia SpA and ease a combination with Air France-KLM (AF) Group or another airline, according to four people with knowledge of the plan.

The premier is meeting for a second day in Rome with Alitalia management, its investors and its bankers, said the people, who asked not to be named because discussions are private. Alitalia’s board is meeting later today at its headquarters to discuss the situation.

The government is also working to persuade existing shareholders to increase Alitalia’s capital to avoid a liquidity crunch and make the company more appealing to a partner, said the people. Air France-KLM, which has held a 25 percent stake in Alitalia since 2009, would end up with a stake of about 49 percent after a capital increase, two people said.

“I’m sure that Alitalia can’t go it alone,” Letta said Oct. 6 in an interview televised on SkyTG24. “Italy doesn’t have the size for a global flagship. We have to integrate with others.”

The Italian carrier is seeking an injection of at least 100 million euros ($136 million) after the first-half net loss swelled and cash dwindled. Alitalia’s priority is to resolve its cash issue with new financing and a capital increase before combining with an international player, the people said.

A spokeswoman for Letta and an Alitalia representative declined to comment. Jean-Charles Trehan, a spokesman at Air France, had no comment.

Letta had already met with senior management of Alitalia last week to discuss how to avert a collapse of the airline, two people familiar with the gathering said at the time.

Air France is under pressure itself to cut costs, and its French subsidiary plans to eliminate 1,826 ground staff jobs through voluntary employee departures to address weaker demand.

To contact the reporters on this story: Tommaso Ebhardt in Milan at; Andrew Frye in Rome at

To contact the editors responsible for this story: Chad Thomas at; James Hertling at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.