Alitalia Unions, Politicians Attack Air France Bid

Alitalia's agreement to be taken over by Air France-KLM triggered an outcry from politicians and unions on Monday and sent its shares down so low that trading was halted.

A hot issue ahead of Italy's general election on April 13-14, the deal to sell the nearly bankrupt carrier needs the blessing of Italy's next government and Alitalia's strike-prone unions.

Air France-KLM offered one share for every 160 shares of Alitalia, valuing the carrier 0.10 euro a share, or 138 million euros ($183.8 million). The price is an 81 percent discount to the record low at Friday's close.

"It's an unconditional surrender," CGIL union leader Fabrizio Solari told Italian daily la Repubblica.

Unions oppose Air France-KLM's plans to cut flights and staff at the airline, which is 49.9 percent state owned. Anpac, a pilots' union, has said it is ready to fight the sale, la Repubblica reported.

For the takeover to work "there needs to be significant restructuring at Alitalia much of which will rest on co-operation with the unions", UBS analysts said in a note. "This is now the key concern."

Some opposition politicians compared the agreement to the Battle of Caporetto, Italy's worst military defeat during World War One and a lingering national symbol of collapse.

"It's a real Caporetto of the government and of the administrators it named," Lombardy region President Roberto Formigoni said, according to la Repubblica.

POLITICAL DECISION

Formigoni is one of many northern Italian politicians crying foul over Air France-KLM's plans to scale back Alitalia's operations at Malpensa, Milan's hub.

Opposition leader Silvio Berlusconi, ahead in opinion polls, has criticised the sale to Alitalia's long-time partner, saying he favours an Italian solution.

It remains to be seen if he will oppose the sale to Air France-KLM should he win the elections.

Alitalia's shares were suspended from trading after bids came in offering 30 cents, or 43 percent less than Friday's close. By 1025 GMT the stock was still suspended.

"The offer level and the conditions imposed by Air France-KLM show in our view that the French company has a strong hand," Paris-based broker Oddo Securities said in a note.

Air France-KLM, the world's biggest airline by revenues, had initially offered 0.35 euro per share. Its binding offer is much higher than that of Air One, a small Italian carrier that had bid one cent a share and was snubbed by Rome.

MONEY DRAIN

Alitalia, which loses more than 1 million euros a day, on Feb. 29 said that it had just 282 million euros in cash left, down 23 percent from a month earlier, and that its debt had risen 7 percent to 1.28 billion euros.

Air France-KLM shares were down 2.4 percent at 15.60 euros, outperforming the DJ Stoxx European travel and leisure index which was down 3.8 percent.

Alitalia said late on Sunday it would also receive a credit line of 300 million euros from the Italian government.

The Italian Treasury on Monday posted on its Web site Alitalia's letter detailing Air France-KLM's offer in case other companies want to come forward with "better public offers".

Alitalia said it expected the stock swap to begin in June and Air France-KLM intended to delist Alitalia's stock if it acquired more than 90 perecent of it.

Air France-KLM's offer also includes 608 million euros to buy back Alitalia's convertible bonds and a 1 billion euro capital increase.

The takeover would end the 60-year independence of a global Italian brand. It would also avoid the airline going broke as its cash reserves quickly dry up.

Air France-KLM set a deadline of March 31 for several conditions on its offer, including agreement with airports operator SEA over a 1.25 billion euros claim for damages for cutting slots at Malpensa.