Waiting in the wings

If the recent rumours of a blossoming love affair between the French president, Nicolas Sarkozy, and the Italian-born former top model Carla Bruni, prove to have any substance, they won’t be the only Franco-Italian couple to be hitting the headlines this week.

Air France – KLM has outlined its offer to buy Italy’s troubled national carrier Alitalia. A daring move perhaps as when it first announced that it might be making a firm offer back in late November, shares in the Franco-Dutch airline fell by more than six per cent – their biggest drop in more than three years.

But that apparently hasn’t put off the company’s interest in proposing a deal which would see it inject around €750 million into the virtually bankrupt Italian flag carrier.

If successful it would involve a share swap, while allowing the Italian government to retain a stake in the new company.

The attraction for Air France has to be control of the profitable Milan-Rome route and the likelihood of encouraging Italian passengers to use its Paris and Amsterdam hubs for long haul flights. But nonetheless you have to admire the business nerve of any company willing to take on the risk of rescuing the Italian airline as the statistics speak for themselves.

Alitalia has a debt of around €1.2 billion, loses more than €1 million a day and hasn’t notched up an annual profit since 2002. And as if those figures were not bad enough, it also has a fleet of notoriously ageing, gas-guzzling aircraft and a 20,000 plus workforce that seems to spend as much time on the ground striking as it does in the air flying. Little wonder then that the government is so keen to offload it.

And it’s not the first time this year Rome has tried to find a buyer. A previous attempt failed after all the bidders withdrew, mainly over concerns as to the airline’s precarious financial situation.

Furthermore any potential buyer can hardly have been encouraged by comments either from the chairman describing Alitalia as “comatose” or the Italian prime minister, Romano Prodi, remarking that the company was “completely out of control.”

This will not be the first time Air France has made overtures towards Alitalia. It first started talks of a merger back in June 2001 but abandoned them opting instead to join forces with KLM three years later.

By anyone’s reckoning turning around the Italian carrier will be a hard task. But many economists rate Air France – KLM as the best bet for a long-term restructuring of Alitalia as it has far deeper pockets than either of its main competitors.

The financial risks involved could be considerable for all sides involved, but time is running out and Rome has set a Christmas deadline for the sale.

But there again a decision was due last week, was delayed – again. So expect more news this week for a marriage not quite made in heaven – perhaps.