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Alitalia joins transatlantic accord

July 5, 2010

By Guy Dinmore in Rome Published: July 5 2010

Alitalia, Italy’s relaunched flag-carrier, on Monday entered the transatlantic joint venture between Air France-KLM and Delta as executives from the airlines reported improvements in traffic numbers.

Rocco Sabelli, Alitalia’s chief executive, called the agreement “an important development in Alitalia’s departure plan” since it was rescued from bankruptcy in early 2009. He reiterated that the airline aimed to break even on an operating basis by the end of 2011, a year later than originally planned.

“Alitalia is a great brand, an iconic brand,” enthused Delta’s Richard Anderson at a Rome press conference. He said its inclusion, with Rome’s Fiumicino as an extra European hub, and its entry into the large Italian market, would give the group the “largest and most expansive transatlantic network alliance” with a market share of 26 per cent, generating an annual $10bn in revenues.

Pierre-Henri Gourgeon, chief executive of Air France-KLM said the company, which bought a 25 per cent stake in the new Alitalia, would be ready to discuss an increase in capital with the airline’s Italian shareholders if that was necessary.

Mr Sabelli said he had no intention of asking for extra funding and said Alitalia currently had €500m in cash and credit lines.

Explaining an apparent writedown in Air France-KLM’s valuation of its stake in Alitalia, Mr Gourgeon said this was an accounting figure based on net book value but that he regarded the airline’s strategic value in line with the more than €300m that Air France-KLM paid in 2009.

Mr Gourgeon said the three pillars of the transatlantic joint venture were the sharing of decisions, capacity and results. Growth was returning, he said.

Mr Sabelli forecast positive results for Alitalia in the second half after a “good improvement” in the first half over 2009. But he warned that the “road is long, and uncertainties remain”.

Mr Anderson forecast the European airline market to continue to go through a process of consolidation based on the three major players – Air France-KLM, British Airways and Iberia, and Lufthansa. He said traffic and demand in the US was up “very significantly” year-on-year. Unit revenues were up by more than 20 per cent last month compared with June 2009.

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