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Air France-KLM makes first move on Alitalia
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Air France-KLM on Thursday kicked off a round of non-binding offers for loss-making Italian carrier Alitalia, with rival airlines Lufthansa and Air One expected to follow.
The three airlines are the only names left from a shortlist of six drawn up as possible partners by Citigroup in October after it took over the sale when the government´s attempt to auction its 49.9 percent stake in the carrier flopped.
Air France-KLM said it was sending a non-binding letter of interest to Alitalia´s board, which is due to meet at 1700 GMT to consider the offers. It said it expected Alitalia to chose a preferred candidate by the end of the year.
Air France-KLM refused to take part in the earlier bidding process because of concerns at Alitalia´s willingness to restructure to stem losses and has emphasized it won´t do a deal that would dent its own profitability.
In a statement on Thursday, the Franco-Dutch airline said it would aim to develop a business plan in line with that drawn up by Alitalia Chairman Maurizio Prato and - in a reference to potential union opposition - said it would be "counting on the support of the Italian carrier´s entire workforce".
"This major step in European consolidation would not only be beneficial for passengers but would also meet the requirements for the (Air France KLM) group´s economic and financial stability, including its target of a return on capital employed after tax of 8.5 percent by the end of fiscal 2009/2010," Air France Chairman Jean-Cyril Spinetta said in the statement.
Alitalia has a market value of about 1.1 billion euros and about 1.2 billion of debt. It loses over a million euros a day and is frequently hit by strikes from powerful unions.
Prodi´s fragile centre-left government has to find a private solution for this headache as the European Union has refused to allow any more state aid to the airline.
An offer from tiny Air One, backed by Italy´s biggest retail bank Intesa Sanpaolo (ISP.MI: Quote, Profile, Research), would keep the flagship in Italian control -- something the government had set as a condition but which Prodi said this week was a secondary concern.
Prodi himself has said he expects Lufthansa to bid, although late on Wednesday there was still no word from the German carrier on whether it had decided to make an offer.
Alitalia´s lucrative business market -- especially its dominance of the route from Rome to financial capital Milan -- remains attractive despite the albatross of labor costs and unrest.
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