Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Air France Won’t Buy When Affiliate Alitalia Sells Stock

Nov. 14 (Bloomberg) -- Air France-KLM Group won’t participate in Alitalia SpA’s planned capital increase, saying the proposed restructuring of the unprofitable Italian carrier isn’t sufficient to win its support.

Air France-KLM, the largest investor in Alitalia with a 25 percent stake, will instead convert bonds to boost the Rome-based company’s equity, it said in a statement today after a meeting of Alitalia’s senior management late yesterday.

“Even if the industrial component of the new plan presented yesterday by Alitalia is a step in the right direction and is receiving Air France-KLM’s full support, the necessary financial restructuring measures are still not yet met,” Air France said in the statement.

Alitalia has been teetering on the brink of collapse as its losses swelled and reserves dwindled amid increased competition and a shrinking customer base. Italy’s government has brokered a rescue package that includes a capital increase partly supported by the state-owned postal service. Air France bought its stake in Alitalia in 2009 and has seen the value of that holding collapse as the Italian carrier’s crisis deepened.

Sidestepping the capital increase will dilute Air France’s stake to about 8 percent if the 300-million euro capital increase will be fully subscribed, according to Bloomberg calculation based on company’s documents.

Alitalia sold 1.43 billion euros of convertible bonds and new shares in 2002 as part of a previous turnaround effort, and the airline defaulted in 2008. Air France participated in a loan this year to ease Alitalia’s financial constraints. The loan included the possibility of conversion into equity, which Air France today said it will exercise after the capital increase.

Air France paid 323 million euros for its stake in Alitalia, which had gone bankrupt and was given a fresh start when it was stripped of its debt and its assets were merged with those of Air One SpA. The French carrier said today it would seek to remain a “loyal and serious” partner.

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.