Air France-KLM is the first airline to submit an offer for troubled Italian flag carrier Alitalia.
Rival bids are now expected for the 49% stake owned by the Italian government - which hopes to find a buyer by the month”s end - but Lufthansa has decided not to make one. The Alitalia board will announce all proposals following a meeting tonight at 18:00.
Air France has been considering a move for the loss-making Alitalia for months and said in October it needed to be clear a strict return on investment ” 8.5% back on its capital after tax by 2009-10 - would be met.
Now it seems happy this would be the case.
”This major step in European consolidation would not only be beneficial for passengers but would also meet the requirements for the group”s economic and financial stability,” said Air France chairman Jean-Cyril Spinetta.
It has set out its stall ” it says it wants to ”win back the Italian market” with Alitalia, and proposes a large international route expansion from Rome-Fiumicino to make it a comparable hub to the likes of Amsterdam Schiphol and Paris Charles de Gaulle.
It would increase medium and long-haul services from Milan with early morning departures and evening return flights to satisfy the needs of business travellers.
Anticipating probable union opposition to the deal, Air France says it ”is counting on the support of the Italian carrier”s entire workforce”, who it says will benefit from the airline”s projected growth.
A Lufthansa spokesman said: ”The risks outweighed the positives, which is why our board decided not to place a bid.saw threat of losing our investment grade rating ” meaning future investments would have higher costs.”
Airline consolidation is becoming increasingly desirable ” encouraged by the Open Skies agreement coming in March - as large numbers of carriers fight for market share. Air France-KLM has also expressed interest in Spanish flag carrier Iberia, while British Airways withdrew its interest last month saying the terms were not viable.