Tom Gill
Alitalia's privatisation is well underway but the flag carrier still has to resolve escalating rows at Milan/Malpensa.
In mid-May, state holding company IRI was due to sell 27.6 million ordinary shares, equivalent to 18 per cent of equity, to investors for L900 billion (US$512 million). The carrier also launched a capital increase of L3,000 billion ($1.7 billion) with the issue of 1.81 billion shares.
IRI is set to receive L2,000 billion worth of shares from the capital increase. This will recoup the amount IRIhas paid out in state aid since mid-1997 as part of Alitalia's restructuring plan, or as IRI puts it 'an advance payment for future capital increases.'
With the offering and capital increase, IRI will reduce its 85 per cent stake in the flag carrier to 67 per cent. A further 20 per cent is to be offered to employees this summer, and following this IRI will be left with a 53 per cent stake.
IRI intends to reduce its stake further later this year or next year, but the pace of privatisation will 'depend on the company's financial performance in the next six months', says an Alitalia source.
Alitalia's financial performance is improving - it made a net profit of L268 billion ($154 million) in 1997 and expects an operating profit for the first four months of 1998, says a company spokesman. Alitalia's recently signed alliance with KLM will bring additional revenues of $400 million for the two alliance partners up to 2001, according to chief executive officer Dominico Cempella.
Alitalia expects cost savings and increased revenues from the alliance to allow it to finance 'the core' of a L4,300 billion investment programme up to the year 2001 out of its cash flow, 80 per cent of which will be spent on new aircraft.
Despite this upbeat outlook, Alitalia still has plenty of problems to resolve. The flag carrier has been the focal point of a high profile political row over its Milan/Malpensa hub, which it sees as key to its future growth and alliance with KLM. Alitalia will be transferring around 10 per cent of its services currently flying into Rome/Fiumicino to Malpensa on 25 October and this has provoked attacks on Alitalia management by senior politicians fearing Italy's poorer south will lose out as a result.
Eight European carriers are demanding that the European Commission's DGVII directorate overturn last year's decision by the Italian government's to transfer routes with less than 2 million annual passengers from Milan/Linate to Malpensa as of 25 October 1998. The eight carriers in question are British Airways, Lufthansa, TAP, Iberia, Olympic, SAS, Sabena and Air France. 'We hope to get a decision in June that the decree is discriminatory,' says Marco Benincase, BAmanager in Italy. The Alitalia and Air One Rome-Milan services are the only ones currently unaffected by the move to Malpensa.
Source: Airline Business
