Italy’s postal service agreed to participate in a capital increase for Alitalia SpA that is part of a rescue package brokered by the government to revive the airline pummeled by a shrinking business and years of losses.
Poste Italiane SpA’s contribution would help “guarantee the resources to reach the capital increase needed to ensure the current service,” Prime Minister Enrico Letta’s government said late yesterday. It didn’t specify the size of the postal service’s offering toward the refinancing, which trade unions estimate is as high as 500 million euros ($676 million).
Alitalia needs “renewal, stable shareholders and a significant restructuring through a new business plan - Poste’s entry is based on these conditions,” Letta’s office said in a statement.
Enlisting the support of the postal service follows Letta’s push for a state-owned entity to aid the ailing airline, which risks running out of business within days, according to the Italian civil aviation authority. Pairing Alitalia and Poste Italiane will offer business links ranging from Poste’s charter company Mistral Air to cargo services, the government said.
The measures discussed by the carrier and the government include the proposed capital increase, which is three times the amount the carrier had sought earlier, and a bank loan of about 200 million euros, union officials said yesterday after meeting the carrier’s CEO. Alitalia’s unions have called the company “on the verge of bankruptcy,” and no longer self sufficient.
Alitalia has faced financial ruin 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.
A group of investors, including Intesa Sanpaolo SpA, Italy’s second-biggest bank, and Atlantia SpA, its No. 1 toll-road company, bought the carrier’s main assets and combined them with smaller competitor Air One SpA before selling the stake to Air France-KLM Group, which now owns about 25 percent.
Letta spent days discussing a rescue plan for Alitalia with key management, shareholders and banks. Air France-KLM, the largest stakeholder, has said it needs more information on the Italian airline’s finances before exploring a larger stake, and yesterday’s accord will help attract a partner, the government said.
“Now the integration with the foreign partner can be dealt with from a position of equal basis,” Transport Minister Maurizio Lupi said in a release after the government announced the accord with the postal service.
Poste may contribute 75 million euros ($102 million) to a 300 million-euro capital increase, a person familiar with the matter said earlier, asking not to be identified because the talks are private. Spokesmen for Alitalia and the postal service declined to comment.
Alitalia’s resources have been depleted by mounting losses and competition from low-cost carriers including EasyJet Plc. Compounding Alitalia’s woes is a threat by energy company Eni SpA to halt fuel supplies in two days unless Alitalia shows it is 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.
Alitalia’s board, originally scheduled to meet in Rome yesterday, will instead convene today. The company’s priority is to first resolve the cash shortage through new financing and a capital increase before combining with an international player, people familiar with the proposed rescue plan have said.
“The government expects that the shareholders take their responsibilities” by contributing to the carrier’s recapitalization, Letta’s office said, adding that banks also need to make a contribution.