Italian Crisis Boosts North On Alitalia

January 28, 2008

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The collapse of the Italian government is raising hopes among northern politicians that they will be able to block the sale of Alitalia to Air France-KLM, backed by the outgoing executive.

Air France-KLM said on Friday -- a day after the government resigned after losing a key confidence vote -- that exclusive talks with state-controlled Alitalia would continue.

But Lombardy region governor Roberto Formigoni has already called for any decision about Milan's Malpensa Airport, which lies in his territory, to be put on hold.

"The government should impose a moratorium of three years to Air France. If it does not, the north will bring people out on the streets," he told la Repubblica newspaper on Monday.

Formigoni has expressed this view before, but the current absence of a politically-strong government makes it more likely that this time he will be heard.

On a visit to Milan on Monday, Italy's infrastructure minister, Antonio Di Pietro, reassured northern politicians that the deal was far from done and might not go through.

"The sale of Alitalia cannot be left to the management alone, because they are only interested in raising as much money as possible," Di Pietro told a business audience. A slightly higher price, he said, would not compensate for the damages to the business network which revolves around the airport.

Di Pietro has been reported in the past as being in favor of a rival offer from local airline Air One.

Di Pietro added that discussions with local authorities on Malpensa should resume quickly -- something demanded by northern businessmen and politicians, including Formigoni.

Under a plan already approved by Alitalia's board that Air France-KLM says it favors, the Italian airline plans to cut flights from Malpensa to 445 per week from the current 1,238.

Politicians in northern Italy, where Malpensa is the major airport, are concerned about losing ground to Rome if the plan goes ahead.

"The company is majority-held by the Treasury. If we do not have a minister then everything falls apart," said Northern League leader Umberto Bossi in Rome on Monday.

Alitalia is deeply in the red and losing more than EUR1 million euros per day.

"The liquidity the company can count on will last a certain number of months, say between five and eight months, but no longer," said a source close to the talks.

According to both Alitalia and Air France-KLM, the Italian airline's twin hub structure -- in Malpensa and Rome's Fiumicino -- is a main reason for losses.

Alitalia is set to decide by January 31 how to dispose of slots at Malpensa which will be unused when routes are cut.

According to local newspapers, the flight cuts will cut around 8,000 jobs at the airport, which lies more than an hour's drive from central Milan and is often disregarded by the public, which prefers to use the smaller but closer Linate.

According to data reported by La Repubblica newspaper on Monday, only 11.4 percent of all Italian passengers taking intercontinental flights leave directly from Malpensa, with 82 percent leaving from alternative airports.

(Reuters)