Alitalia draws up shortlist

Three carriers make Alitalia's shortlist with SkyTeam partner Air France-KLM the frontrunner

Air France-KLM, Lufthansa, Aeroflot and Italian carrier Air One have made a shortlist of potential buyers drawn up by Alitalia's financial advisors, Citigroup.

Private equity firm Texas Pacific Group and a consortium organised by Rome lawyer Antonio Baldasarre have also been shortlisted for the next round of negotiations, but Alitalia chairman Maurizio Prato is understood to favour selling to another airline.

While Air France and Lufthansa are open to overtures from Alitalia, they say conditions for a sale must be right. Air France is considered the frontrunner but chief executive Jean-Cyril Spinetta (pictured) will not say much about a potential merger with its SkyTeam partner other than to confirm talks will take place over the next several weeks.

Air One is the rank outsider, says Polis Polycarpou, vice-president of DVB Bank's airline research and analysis division: "Even with Intesa Sanpaolo, ­Italy's second largest bank, behind it, I doubt such a small operation as Air One could really turn Alitalia around and bring the airline back into profitability."

China Southern is reportedly interested in acquiring a minority stake in Alitalia if it is bought by the Baldassarre consortium. The group is thought to be seeking financing for the deal from an investment fund or bank.

China Southern may also form a commercial partnership to boost flights to China with the merged Alitalia-Air France-KLM if the Air France bid succeeds. Alitalia, Air France and KLM are all members of SkyTeam and China Southern is due to join the alliance later this year.

Observers say TPG is unlikely to make an aggressive attempt to buy Alitalia given the number of potential suitors lined up by the airline's management and TPG's difficulty in identifying suitable Italian partners. Prato's preference to sell to another airline is also viewed as a barrier by TPG.

TPG is in the middle of a $3.2 billion bid for Iberia in conjunction with British Airways and Spanish private equity firms Quercus, Ibersuizas and Vista Capital. BA is contributing its 10% equity stake in oneworld partner Iberia to the consortium but no capital.

If the sale of Iberia to BA/TPG goes ahead, Lufthansa is widely expected to throw its hat into the ring for Spain's second largest carrier, Spanair. SAS unveiled plans in June to put its 100% stake in Spanair up for sale, along with its minority stake in bmi. So far only Aerolineas Argentinas and Air Comet parent Grupo Marsans has formally stated an interest in Spanair.

Lufthansa has publicly stated its desire to be part of the wave of consolidation but declines to specifically confirm its interest in Spanair or increasing its stake in bmi. All three carriers are members of Star. "We are carefully watching the development of different scenarios and will take an active role when we think a certain airline matches our criteria," says the German carrier.

Many expect ongoing consolidation in Europe will result in a triumvirate comprising Air France-KLM, Lufthansa and BA. Spinetta responds: "The movement started five years ago with the Air France-KLM breakthrough and this was followed by Lufthansa-Swiss. There will be other moves. It's not finished. Iberia and Alitalia say their future is to link with other legacy carriers. It's not analysis. It's what they say publicly."

Spinetta says more deregulation and the new Europe-US Open Skies deal is driving the new round of consolidation. "The changes are even more rapid than expected. We're going from a totally regulated to a totally deregulated market. The concept of a national carrier is no longer relevant. It makes no sense."

Richard Aboulafia, vice-president of analysis at US consultancy Teal Group adds: "In terms of an end game, Europe is moving ultimately to three big network carriers. But political and labour issues need to be ironed out before this can happen.

"The intra-European market is increasingly in the hands of new low-cost carriers and other niche carriers. I would expect the big three to get the intercontinental business traffic they want, while the intra-European traffic increasingly goes to a growing mosaic of new players."

Source: Airline Business