Air France KLM to hold 25% of new Alitalia, which launches today

As was widely expected, Air France KLM will become the relaunched Alitalia's international partner and will take a 25% stake in the restructured carrier through a capital increase of approximately €323 million ($435.1 million).

The decision ends months of speculation and uncertainty and came on the last day of the flag carrier's operation as the "old" Alitalia. The AF KLM board approved the investment Friday (ATWOnline, Jan. 9).

"In view of the many challenges facing our sector, strengthened cooperation is more than ever a necessity between carriers and we have now made a further step towards this," AF KLM Chairman Jean-Cyril Spinetta and CEO Pierre-Henri Gourgeon said in a statement. The Franco-Dutch group will hold three of 19 seats on AZ's board, including two of the nine comprising the executive committee. The agreement includes a four-year lock-up period but allows AF KLM to increase its holding and make an offer for a controlling stake in 2013. The lock-up will cease to apply only in the case of a stock market quotation starting in the third year.

AF KLM presented the "best solution" compared to alternatives offered by Lufthansa and British Airways, AZ CEO Rocco Sabelli said, noting that LH "showed interest in the Italian market but never in a concrete project for a new Alitalia," while BA never wanted to make a "real investment." AF KLM was regarded by most as the natural choice owing to both its membership in SkyTeam and its antitrust immunity with AZ on transatlantic routes. The carriers have partnered on joint venture on routes between France and Italy since 2002. In 2007, AF KLM won a bid for the Italian government's 49.5% stake in AZ but was rebuffed by incoming Prime Minister Silvio Berlusconi.

AF KLM said the partnership will be based on a multihub strategy in which Paris Charles de Gaulle, Amsterdam Schiphol, Rome Fiumicino and Milan Malpensa will feature "on an equal basis." Synergies derived mainly from network optimization and revenue management will be achieved over the next three years and should amount to some €720 million for AZ and around €90 million for AF KLM by either the second or third year.

The entire arrangement is subject to approval by Alitalia shareholders and EU competition authorities. The latter are expected to clear the deal by the end of the current quarter, AF KLM said.

Yesterday was the old Alitalia's last day of existence. At 10 p.m., all assets were transferred to Compagnia Aerea Italia. The "new" Alitalia will carry the same name and logo and is essentially a merger of the slimmed-down AZ with smaller rival Air One, which was a Lufthansa partner. The new airline will operate 148 aircraft to 70 destinations, including 13 international airports. The first "new" flight was scheduled to depart at 6 a.m. today from London Heathrow to FCO.