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Air France-KLM calls off its Alitalia takeover bid

“I recognize the breakdown of negotiations, which was not of our doing. It’s a project that I deeply believed in and continue to believe in, because it would have allowed Alitalia to quickly return to profitable growth.”

Jean-Cyril Spinetta, Air France-KLM chairman

Air France-KLM’s bid to take over Alitalia fell apart on Wednesday as union negotiations broke down and the failing Italian flag carrier’s chairman Maurizio Prato resigned.

“I recognize the breakdown of negotiations, which was not of our doing,” Air France-KLM chairman Jean-Cyril Spinetta said in a statement. “It’s a project that I deeply believed in and continue to believe in, because it would have allowed Alitalia to quickly return to profitable growth.”

Barring a stunning new development, Alitalia will now have to embark on long and painful bankruptcy proceedings seen before with Switzerland’s Swissair and Sabena of Belgium.

Alitalia’s board of directors were set to meet at 1pm yesterday to “decide the appropriate steps,” the Italian airline said in a statement.

Prato agreed with the basic elements of Air France-KLM’s proposed deal for the takeover of Alitalia and had repeatedly hinted that he would step down if a deal was not reached.

The European giant had said it wanted all the unions to agree to the takeover plan before it went forward.

Spinetta earlier on Wednesday walked out of negotiations with the unions after rejecting their counter-proposals, a union official said.

“After several long negotiating meetings, the unions today made a new proposal in a framework that is totally different from the one to which Air France-KLM has adhered since autumn 2007,” Air France-KLM said in a statement.

The Franco-Dutch company said it had “no mandate from its board of directors to pursue this new framework.”

Maintaining loss-making activities “seems incompatible with the goal of returning rapidly to profitability,” it said.

Outgoing Italian Prime Minister Romano Prodi blamed the “great mistake” of the unions for the breakdown of the talks, Italian media reports from Bucharest said, where he is attending the NATO summit.

The Milan stock market meanwhile announced the suspension of trading in Alitalia shares late on Wednesday. The board of the ailing company was due to meet at midday yesterday.

The unions had asked Air France-KLM to maintain all of the company’s activities, while the firm planned to drop the cargo service and part of ground maintenance unit AZ Servizi.
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