Translated material
Big flight
Air France-KLM mulls takeover of AlItalia
The French Air France-KLM Group, Europe's largest airline, has decided to expand its business by acquiring the unprofitable Italian airline AlItalia SpA. Yesterday, the leaders of both companies began discussing the terms of the merger, but have not yet agreed on anything definite. As Air France-KLM CEO Jean-Cyril Spineta told Reuters, the discussion was about a potential restructuring of the Italian company and “the effect that any merger could have.”Both sides negotiated cautiously. In connection with the crisis that AlItalia is going through , the management of the French company made it clear that it will not invest in the merger until it understands that the Italians have real prospects. AlItalia is expected to undergo a new successful restructuring and independently overcome the financial crisis. In the meantime, as representatives of Air France-KLM clarified, there is no decision on a merger. The Italians also said that they would not join the alliance until they knew the final goal of the French company. AlItalia’s position was voiced in an interview with the French Figaro by Italian Prime Minister Romano Prodi: “I have always supported the negotiations between the two airlines. But at the moment I doubt it and want to understand the true intentions of Air France. We need to know whether Air France is going to create a large European airline group in which Italy has a place, or whether it wants to take a share of the large and rich Italian airline market.” Mr. Prodi promised to discuss possible prospects for a merger at the Franco-Italian summit.
Mr. Prodi's participation in discussing the future fate of the company is not accidental. The Italian government owns slightly less than a majority stake in AlItalia and has repeatedly made it clear that it is not interested in nationalizing the company . Strengthening Mr. Prodi's statement, AlItalia noted that the company's chairman, Giancarlo Cimoli, already has the mandate to enter into an agreement with another airline, but did not disclose its name.
Apparently, experts say, both participants are still carefully studying the reaction to the possible merger and trying to achieve better terms of the deal. The French are well aware that AlItalia has been unprofitable for the last four years - by the end of this year, its losses could amount to 180 million euros. This means the company is losing around 20,000 euros an hour, while its debts are half the turnover of 1.8 billion euros in the last financial year. The company recently announced that it needed a new restructuring plan. At the same time, Italians know that Air France-KLM has been eyeing AlItalia for a long time and even owns 2% of its shares.
For Air France-KLM, now is a good time to consolidate its leadership position in the European air transportation market. According to the latest financial reports, the company confirmed its forecast for growth in its core earnings for the full financial year. “The first quarter was excellent and the second quarter very good,” Air France-KLM Chief Executive Pierre-Henri Gourget told Reuters. -- Expectations for the coming weeks are consistent with strong first-quarter activity. This enables us to confirm our forecast of a significant increase in operating profit in the 2006/07 financial year compared to the previous year."
Information about a possible merger brought down the Air France stock market. The market perceived the company's intention to sit down at the negotiating table with AlItalia as a possible miscalculation. At the end of the day, its securities lost 7.3% of their value, demonstrating the most significant drop in the last three years: for one share of the company they offered 29.9 euros, which is 2.35 euros less than the day before. And since the beginning of the year, the price of Air France securities has increased by 67%.
Global carriers will need 22.7 thousand new cargo and passenger aircraft worth a total of $2.6 trillion by 2025 , according to the forecast for the development of the global air transport industry prepared by the aircraft manufacturing concern Airbus. Compared to the forecast two years ago, demand has now increased by 31.2%. According to experts, this can be explained by the expected significant growth in passenger traffic, stricter environmental requirements and the increasing need of airlines for new fuel-efficient aircraft. “The impact of these factors will require an accelerated pace of replacement of over 12 thousand aircraft in operation,” the forecast notes. Airbus estimated the need for ultra-high-capacity passenger and cargo aircraft at 16 thousand units for a total of $503 billion, which will amount to 20% of the total cost of all new aircraft forecast for delivery over the next 19 years. The need for wide-body passenger aircraft will account for about 42% of the cost of all supplies. The greatest demand is expected in the category of such aircraft with a capacity of 250-300 passengers and is estimated at 3.7 thousand units. It is this category that includes the A350 family airliners, which are planned to be put into production, and the already produced A330/A340 family airliners. The greatest demand - over 15.3 thousand units - from companies will be narrow-body aircraft with a number of seats from 100 to 220. Their share in the total cost will be 42%, and in quantitative terms - 70%. Experts call the Asia-Pacific region the fastest growing market, which “will occupy a third of the global transportation market in 2025,” the forecast says. INTERFAX