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Complaints abound over Alitalia sale to Air France-KLM

The Italian government's decision to sell its stake in Alitalia SpA to Air France-KLM Group was met with threats of protests by unions and some politicians and was denounced as a "surrender" by the losing bidder, Air One SpA.

"Italy and the air transport industry, a strategic national sector, can't surrender in this way to a large international group that is making off with rich pieces of our market," Carlo Toto, founder and chairman of Air One, said in an e-mailed statement on Friday.

Italian Finance Minister Tommaso Padoa-Schioppa on Friday said the government had chosen Air France over Air One to enter into exclusive talks to sell its 49.9 percent stake in Alitalia, which is losing more than 1 million euros (US$1.47 million) a day. The decision ends a yearlong sales process aimed at saving the carrier from bankruptcy.

Air France has offered to buy the stake through a share swap that values Rome-based Alitalia at 486 million euros, or 0.35 euros a share, less than half its market price. Air One offered 0.01 euro a share for Alitalia, which has about 1.2 billion euros of debt -- more than its current market value.

Alitalia shares rose 8.3 percent yesterday to 0.8 euros each in Milan, valuing the company at 1.1 billion euros. The stock has dropped 24 percent this year.

The Air France offer backed Alitalia Chairman Maurizio Prato's plan to end the carrier's two-hub strategy and shift flights from Milan's Malpensa Airport to Rome's Fiumicino. That proposal has triggered howls of opposition from unions and politicians in the country's industrial north concerned about a loss of jobs and influence in the region.

`Will Get a War'

The decision will unleash "the mother of all battles," said the Northern League, a regional party and a key ally in former prime minister Silvio Berlusconi's government, echoing the phrase late Iraqi president Saddam Hussein used before the first Gulf War.

"The governor has chosen Air France and has decided to sell out the country and the north of Italy," Roberto Calderoli, a senior party official and former reforms minister under Berlusconi said in a statement on the Northern League's Web site. "Well, if they want a war they will get a war."

Roberto Formigoni, head of the regional government of Lombardia where the Milan airport is located, called the government's decision "shameful" and said in a statement late on Friday that "we will not shy away from a political and civil battle to defend the economic and social interests of our people."

Alitalia's main pilots unions supported the Air France offer, saying the French carrier was better suited to help the airline face growing competition internationally and fend off budget airlines in Italy. Still, the pilots criticized the government for not including them in the decision-making process and threatened strikes if the government doesn't wrest job guarantees in the talks with Paris-based Air France.
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