Alitalia Gets $677 Million Lifeline to Pull Carrier From Brink

Photographer: Marc Hill/Bloomberg

A logo sits above the entrance to Alitalia SpA's headquarters at Fiumicino airport in Rome. Close

A logo sits above the entrance to Alitalia SpA's headquarters at Fiumicino airport in Rome.

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Photographer: Marc Hill/Bloomberg

A logo sits above the entrance to Alitalia SpA's headquarters at Fiumicino airport in Rome.

Alitalia SpA secured a 500 million-euro ($677 million) rescue package from shareholders, banks and the state-owned postal service to avert a collapse of the airline that’s losing more than 1.5 million euros a day.

Board members backed a plan to raise 300 million euros by offering new shares to existing shareholders, the Rome-based company said. Air France-KLM (AF) Group, the biggest investor with a 25 percent stake, said its representatives agreed to support the measure to “enable continued operations at Alitalia.”

The intervention of the government to rescue the airline for the second time in five years comes as Italy, the euro region’s third-largest economy, struggles to emerge from the worst economic slump since World War II and at the same time meet the European Union budget-deficit target of 3 percent.

Italy’s postal company Poste Italiane SpA agreed to contribute 75 million euros for Alitalia, while the country’s two biggest banks -- UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) -- will guarantee as much as 100 million euros for eventual unopted rights in the capital increase. They will also provide a 100 million-euro bridge-to-equity loan, according to a release issue late yesterday.

Alitalia shareholders will meet Oct. 14 to approve the financing package. Air France-KLM still hasn’t committed to participating in the capital increase, which needs backing from its own board. The company has been reluctant to inject more money into the ailing Italian carrier as Air France-KLM itself undergoes a restructuring and job cuts.

State Intervention

Pairing Alitalia and Poste Italiane will offer business links ranging from Poste’s charter company Mistral Air to cargo services, the government said Oct. 10. Alitalia needs “renewal, stable shareholders and a significant restructuring through a new business plan. Poste’s entry is based on these conditions,” Prime Minister Enrico Letta’s office said.

The state intervention, aimed at averting a collapse that Italy’s civil aviation authority said could otherwise have occurred in a matter of days, also drew criticism.

“Italian taxpayers shouldn’t be paying money to ensure that Alitalia’s partners get out of this mess without too much pain,” said Carlo Stagnaro, director of research at the Bruno Leoni research center in Turin. “The only economy of scale between Poste and Alitalia is that a lot of layoff notices will be posted.”

Second Rescue

Alitalia, which employs about 14,000 people, has been on the brink of collapse before. The airline was put into bankruptcy in 2008 after political and labor opposition thwarted attempts to sell the company, which was almost 50 percent state-owned at the time. Former Premier Silvio Berlusconi campaigned then to keep the airline Italian after Air France withdrew its acquisition offer.

An investor group assembled by Berlusconi, including Intesa Sanpaolo SpA, Italy’s second-biggest bank, and Atlantia SpA (ATL), the country’s top toll-road company, bought the carrier’s main assets and combined them with smaller competitor Air One SpA before selling a stake to Air France-KLM.

Alitalia’s resources have been depleted by mounting losses and competition from low-cost carriers including EasyJet Plc. (EZJ) Compounding Alitalia’s woes is a threat by energy company Eni SpA (ENI) to halt fuel supplies tomorrow unless Alitalia shows it’s able to continue operations.

Losses at the Rome-based carrier swelled to 294 million euros in the first half and reserves fell to 128 million euros from 159 million euros at the end of the first quarter.

To contact the reporter on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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