Alitalia on the brink as talks break down

Air France-KLM’s takeover of Alitalia has been abandoned and the Italian airline’s chairman has resigned.

Maurizio Prato stood down after the breakdown of talks between Alitalia’s unions and Air France-KLM management.

He had warned the unions that Alitalia risked going bankrupt if they did not accept the deal.

A crucial board meeting today will have a bearing on the future of the troubled Italian airline.

The Italian government has been trying for more than a year to sell its 49.9% stake in the national airline and says there are no other bidders.

Earlier, economy minister Tommaso Padoa-Schioppa said the only alternative to the Air France-KLM offer would be to put Alitalia into emergency administration.

He also said a $470 million state bridging loan to Alitalia would be impossible unless the Air France-KLM deal was signed.

The government’s sale of Alitalia has been opposed by Milan’s airport operator and prime ministerial candidate Silvio Berlusconi.

Air France-KLM wanted to restructure the Italian carrier but faced stiff opposition from unions.

A statement said that in its final offer made last month, Air France-KLM “clearly indicated” that the offer was contingent on prior agreement with trade unions representative of the majority of the various categories of Alitalia employees (ground staff, flight crews); this agreement concerned the implementation of the Alitalia restructuring plan and its related severance measures.

“Air France-KLM know from experience that in the airline industry no restructuring plan has ever succeeded if it was not first agreed by employees.

“Consequently, Air France-KLM has always considered that the Alitalia industrial plan would have no chance of success unless it had the backing of the trade unions representing Alitalia’s workforce.

“After several lengthy negotiation sessions, the trade unions formulated a new proposal corresponding to a totally different framework to the one in which Air France-KLM had restricted itself since autumn 2007.”

Air France-KLM said it was “regretfully forced” to accept that there was no longer any basis for further negotiations.

“This is because Air France-KLM has no mandate from its board of directors to follow up this new proposal. As regards content, the new proposal, which would involve retaining a number of activities generating large scale-losses within the Alitalia group, seems incompatible with the target of a rapid return to profit.”

Chairman Jean-Cyril Spinetta said: “I regretfully acknowledge the breakdown in negotiations, which is none of our doing.

“This is a project I have profoundly believed in and continue to do so, because it would have ensured Alitalia a rapid return to profitable growth.”