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Old April 3rd, 2008, 03:35 PM   #241
Magellan
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Air France-KLM takeover of Alitalia abandoned

Air France-KLM takeover of Alitalia abandoned:
http://news.bbc.co.uk/1/hi/business/7326320.stm
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Old April 3rd, 2008, 05:07 PM   #242
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Quote:
Originally Posted by Magellan View Post
Air France-KLM takeover of Alitalia abandoned:
http://news.bbc.co.uk/1/hi/business/7326320.stm
Good news for AF/KLM and bad news for Alitalia's workers.
Maybe will Berlusconi buy Alitalia for less than AF/KLM's proposal ?
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Old April 3rd, 2008, 08:54 PM   #243
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I guess this is not totaly a bad news for the Italian economic system, the Italian pride and especially for our airports (Fiumicino but above all Malpensa).

There'll be a solution, with the intervention of private investors and hopefully without public money.
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Old April 4th, 2008, 04:34 PM   #244
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Today's developments

11th hour or not:
http://news.bbc.co.uk/1/hi/business/7327762.stm

I wonder which will be the next European national carrier to get into these kind of differculties?
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Old April 9th, 2008, 10:06 AM   #245
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Two articles

Alitalia crashing after years of inertia:
http://news.bbc.co.uk/1/hi/business/7328319.stm

'Short term' survival at Alitalia:
http://news.bbc.co.uk/1/hi/business/7336141.stm
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Old April 15th, 2008, 11:39 AM   #246
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Change of Luck?

It helps if you have got a powerful friend:
http://news.bbc.co.uk/1/hi/world/europe/7347618.stm
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Old April 22nd, 2008, 07:46 AM   #247
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Air France walks away:
http://news.bbc.co.uk/1/hi/business/7359866.stm
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Old April 22nd, 2008, 03:27 PM   #248
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and LH is backing...
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Old April 22nd, 2008, 03:45 PM   #249
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Quote:
Originally Posted by Shezan View Post


and LH is backing...
Air France was the last party involved in a bid; Lufthansa decided not to make an offer back in June 2007.

The latter was particularly interested in landing slots at Milan, and I think it is in their interest to see Alitalia collapse rather than to buy into it.

Update:
And now trading in its shares have been suspended:
http://www.bloomberg.com/apps/news?p...d=aOlSibvlvBwA

Last edited by Magellan; April 22nd, 2008 at 04:03 PM.
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Old April 22nd, 2008, 06:05 PM   #250
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Berlusconi wants to give a loan to Alitalia, is that allowed by the EU? I thought this kind of preferential treatment was forbbiden
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Old April 22nd, 2008, 07:57 PM   #251
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Quote:
Originally Posted by Dinivan View Post
Berlusconi wants to give a loan to Alitalia, is that allowed by the EU? I thought this kind of preferential treatment was forbbiden
Hi,

I think the issues about the loans that have been mentioned are outlined in the linked articles; I do not think it is strictly forbidden, but there would be limits to the amount and duration of the loan, and there would be very strict conditions attached. I think there is talk of a bridging loan that is to be discussed tomorrow by the current government.

However, the new government does not come into power until next month and the airline may not last that long if the creditors call it a day, or it loses its operator's license for instance. Now that share trading has been suspended it is also possible that the airline will be sold shortly at a knocked down price.

About the cabinet meeting later on the 22nd:
http://www.bloomberg.com/apps/news?p...d=a3k2mbg9lw9I

Last edited by Magellan; April 22nd, 2008 at 08:19 PM. Reason: Link Added
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Old April 23rd, 2008, 02:30 PM   #252
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EU says to review Alitalia emergency aid quickly

BRUSSELS, April 23 (Reuters) - The European Commission said on Wednesday it would assess quickly whether Italy's decision to grant ailing airline Alitalia a 300 million euro ($479 million) loan broke European Union state aid rules. "The Commission has been able to prove that when assessment and measures to be assessed are really urgent, the Commission has always been acting with the necessary urgency," a spokesman for the European Union's executive arm told a regular briefing.

Italy's outgoing centre-left government decided late on Tuesday -- in consultation with Silvio Berlusconi, who becomes prime minister next month -- to provide the emergency loan to keep the airline flying.

"The Italian government has clearly stated its intention to give this loan -- at this stage we haven't received notification," the Commission spokesman said, declining further comment on whether the EU executive would permit the loan.

Under EU rules, state aid to companies is forbidden except under certain conditions.

The Commission denied there would be a conflict of interest if it appointed an Italian to be its next transport commissioner -- a job that would include overseeing the EU executive's dealings with Alitalia.

Commission President Jose Manuel Barroso announced the potential reshuffle on Tuesday in the event that Italy's Franco Frattini quits his post as EU justice and security commissioner to join the Berlusconi cabinet, as expected.

"This doesn't take anything away from the fact that the Commission takes decisions as a college," another Commission spokesman said.
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Old April 24th, 2008, 11:28 AM   #253
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EU To review the loan made to AlItalia

It is now up to the EU Commission to decide if the loan is legal:
http://www.bloomberg.com/apps/news?p...d=asMOeiUpiUu0

... but no matter, the new Government gets to appoint the new EU Transport Commissioner:
http://www.bloomberg.com/apps/news?p...d=axaJV1MQusS8

... so it's carry on regardless.
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Old April 24th, 2008, 09:09 PM   #254
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Quote:
Originally Posted by Magellan View Post
It is now up to the EU Commission to decide if the loan is legal:
http://www.bloomberg.com/apps/news?p...d=asMOeiUpiUu0

... but no matter, the new Government gets to appoint the new EU Transport Commissioner:
http://www.bloomberg.com/apps/news?p...d=axaJV1MQusS8

... so it's carry on regardless.
Commissioners get a really tough examination by the Parliament when acceding to power, so even if he is Italian he will act objectively, otherwise if there is suspicion he's going to be partial he probably won't be let to get the chair, and if he has arrived to power and then favours Italy he would be forced to resign, so don't worry about that.
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Old April 24th, 2008, 11:52 PM   #255
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Quote:
Originally Posted by Dinivan View Post
Commissioners get a really tough examination by the Parliament when acceding to power, so even if he is Italian he will act objectively, otherwise if there is suspicion he's going to be partial he probably won't be let to get the chair, and if he has arrived to power and then favours Italy he would be forced to resign, so don't worry about that.
I agree it will not be as bad as I made it out to be; it is more a lucky convergance of events for Berlusconi than a contrivance to have one of his political side-kicks in the role. However, I do not share your confidence in the EU establishment, and I have no doubt that a way will be found to bail-out Alitalia even if it does break EU rules.
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Old April 26th, 2008, 07:51 PM   #256
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Quote:
Originally Posted by Magellan View Post
It is now up to the EU Commission to decide if the loan is legal:
If it is really a loan, it's legal.
Nobody (especially EU commisares who are not elected by people) can blame Italian government when it tries to save it's national airline.
Berlusconi should buy Alitalia with his own money instead of asking it to others Italian investors.
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Old April 27th, 2008, 04:26 AM   #257
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Quote:
Originally Posted by eomer View Post
If it is really a loan, it's legal.
Nobody (especially EU commisares who are not elected by people) can blame Italian government when it tries to save it's national airline.
Berlusconi should buy Alitalia with his own money instead of asking it to others Italian investors.
Government loans are not legal unless they comply with EU regulations.

I think it is the Italian Government that allowed the airline to get in a mess in the first place, and it is anti-competative if the governement supports a failed state (now semi-state) owned business were as private sector companies have to fend for themselves.

Preserving state airlines is out of date thinking and prevents the formation of large scale, low-cost airlines in Europe.
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Old April 29th, 2008, 07:16 AM   #258
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The reality is the industry has evolved to the point where putting money behind a loss-making state carrier is no longer acceptable, and that there have been several major consolidations across the continent (Lufthansa-Swiss, Air France-KLM).
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Old April 29th, 2008, 01:13 PM   #259
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Quote:
Originally Posted by hkskyline View Post
There have been several major consolidations across the continent (Lufthansa-Swiss, Air France-KLM).
Some observers think that only 3 historical airline groups will remain in western Europe in the futur: LH, AF and BA. This is not acceptable for Italian and Spanish governments: all countries want to keep their national airline.
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Old April 29th, 2008, 03:28 PM   #260
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EU Airline Consolidation

Quote:
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Some observers think that only 3 historical airline groups will remain in western Europe in the futur: LH, AF and BA. This is not acceptable for Italian and Spanish governments: all countries want to keep their national airline.
I think market forces will prevail over Old Europe ideas. All of the EU airlines are going to find it extremely difficult under the current economic conditions with even the financially sound airlines possibly having their profits wiped out with oil at $120 (and up) per barrel. Airlines are still reporting that load factors are good, but their operational costs are escalating and will have to be passed on to the customer. It is likely that more routes will become uneconomical for their current operators resulting in the withdrawal of services if the financial drain is not to become unbearable. The winners/survivors are the ones that can respond quickly and minimise the impact on customers through cost reductions. EU Governments are not allowed to bail-out failed airlines with financial aid so they will need to subject themselves to the forces of the open market (financial and competitive). We should therefore now expect to see a very aggressive air-travel market develop in the EU with many of the struggling airlines going to the wall faster than Governments can save them, and some varying degrees of retrenchment by the high-cost carriers. That does not mean that certain EU Governments will not band together within the EU establishment, as they tend to do, to manipulate EU decisions to protect their vested interests, but they will encounter legal opposition to this from the large privately owned airlines and so are unlikely to get it all their own way.

Many 'national carriers' could survive but in a different form (such as Sabena, Swiss, AerLingus) with a move away from premium, international, to low-cost, regional operations. However, they will find it increasingly difficult to survive in a low-cost carrier market dominated by the likes of easyJet and Ryanair whom would seem to benefit from their economies of scale and whom are very aggressive in the application of EU regulations to open local markets.

Even the top-tier airlines will find it difficult; for example Lufthansa's debit is now only one level above junk status, so it will be very expensive for it to borrow money should it find it needs to (this was a factor in it's decision not to bid for Alitalia). Instead Lufthansa may need to cut back its costs, re-trench from un-profitable routes and abandon (or put-aside) its current expansionist policies. Iberia tried to sell itself last year and would make a good fit with any of the big three EU combines or with SAS say to form a middle-tier airline. AF/KLM has already indicated that it will have to cut back on French internal flights (in its case it is losing out to the railways and market forces), and will probably need to review its international operations. BA is pretty savvy, but it could also disappear in a consolidation take-over (say with a US or Middle-Eastern airline) with it being the only private EU major airline that does not have a significant government holding.

I am not sure however that we will be left with only three big carriers, nor that those big operators will all offer premium services. EU citizens would benefit from a major business driven consolidation to reduce costs and to integrate services. Also, the changes to EU regulations governing who can fly and from where will bring competition into previously protected markets. Heathrow is an obvious target, but so too are the struggling airlines, whom are likely to become subject to predatory competition to eliminate them from the market (such as Lufthansa/Swiss vs. Alitalia in northern Italy). The problems are that there are many small airiness of various types in Europe, and it would take a considerable period time for consolidation to make a significant impact. There will also be resistance from some Governments to preserve National Carriers (it just so happens that it was the same Governments that were in favour of the EU Constitution which seems some what contradictory given that consolidation of businesses across Europe is the natural outcome of an integrated Europe). Fortunately these protectionist policies are now more difficult and expensive to enforce than before.

So back to Alitalia. No buyer has made a commitment to take control, and even Berlusconi has now acknowledged that there will have to be major restructuring and job losses if it is to survive. The market situation however is moving very quickly and is undermining evaluations of the company's worth made by auditors even as recently as at the time of the election. All business-driven offers for the airline lapsed some time ago (that of AF/KLM being undermined by the new PM in addition to the changing market conditions and union opposition), and so any take over will most likely have to be accompanied by a financial sweetener of some sort, such as the right-off of debit, transfer of pension scheme or some other inducement plus the removal of all locally imposed conditions on the new owners. This would be very difficult under EU regulations, and so the Italian Government itself may have to initiate the moves to clean up the airline before Alitalia can be sold possibly resulting in industrial action. All this is losing time, and reducing the options open to the airline.

Alitalia's immediate future is probably as a middle to low-cost regional and local carrier, with some premium international services. Rome is likely to be its only major operational base, and its market share is likely to be reduced from its current 44%. Once it is fully private and in a 'healthy' condition, it is likely to be bought up by one of the large combines and turned into a local airline in name only (trading names for local markets will probably be a growing trend as with the railways say in the UK).

So on to the next EU National Carrier to run into difficulties. Olympic would be a good candidate, possibly TAP, or one of the airlines from the newer Eastern countries such as LOT. What is interesting about the difficulties that Alitalia has gotten into, is to see how the EU will react to the issues. The new Italian EU Transport Commissioner will no doubt distort how Alitalia is seen to be treated, and so Alitalia will have repercussions for the EU's current and future policy on air travel.

Last edited by Magellan; April 29th, 2008 at 04:03 PM.
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