Strikes Pound Alitalia, Italy Looks For Exit

May 22, 2007

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Twin strikes stranded thousands of Alitalia passengers on Tuesday, as the Italian government said it was willing to quit the state-controlled airline by selling its entire 49.9 percent stake.

The travel chaos also affected other airlines and looked set to frustrate fans of AC Milan traveling to Wednesday's Champions League soccer final against Liverpool in Athens.

The Italian state sent a letter to its three shortlisted bidders for Alitalia, including a US private equity group that is also interested in Spain's Iberia.

It told them that it wanted binding, cash offers for Alitalia by July 2. It said that while the bids had to be for at least 39.9 percent of the carrier, the state was ready to sell the entire stake.

Shares in Alitalia were 0.23 percent higher at 0.88 euros per share in morning trade, outperforming Milan's main index, which was 0.47 percent lower.

Alitalia, Europe's fifth-largest airline, is losing over EUR1 million euros (USD$1.35 million) a day as strikes and high fuel costs weigh. It has not posted an operating profit since 1998, despite several restructuring efforts.

The Italian state has told bidders their turnaround plans for Alitalia were more important than the offer prices, and let employees know the government is ready to help ease the pain from any job cuts.

The bidders include Russia's Aeroflot and Alitalia's closest domestic rival, Air One. The third bidding consortium includes Texas Pacific Group, which is also bidding for Iberia.

Whoever buys Alitalia will inherit its notoriously strike-prone unions, who have already forced the airline to cancel hundreds of flights this month.

On Tuesday, a protest by cabin crews coincided with a air traffic controllers' strike -- and nearly 400 Alitalia flights were cancelled, or about half of the carrier's daily traffic.

The strike threatened to affect up to 7,000 soccer fans planning to travel to Athens for Wednesday's Champions League final. Civil air traffic authorities warned of a risk to public security.

"Not allowing these people to fly is a serious problem," said Vito Riggio, head of Italy's civil aviation authority.

Meanwhile, the air traffic controllers strike promised to create travel headaches to other travelers as well.

Lufthansa expected major disruption to its Italian flights on Tuesday, canceling 42 return flights. Almost 5,000 passengers are set to be affected.

German budget carrier Air Berlin also expected to have to cancel some flights.