Alitalia close to signing new alliances

Alitalia: A move forward in its turnaround process

The Italian airline Alitalia has moved a step closer to signing commercial alliances with Air France and the US carrier Delta Air Lines.

On Monday, Alitalia's board gave it the go-ahead to sign the two separate deals, which could bring savings of 200bn lire ($87m) a year.

Alitalia hopes to wrap up talks with Air France and Delta possibly by the end of July - but in October at the latest.

It has already signed two memoranda of understanding (MOU) with the two airlines and would join them in the SkyTeam global alliance.

The SkyTeam alliance also includes Aeromexico, Korean Air and CSA Czech Airlines.

The end of 'isolation'

Francesco Mengozzi, the chief executive of Alitalia said: "The signing of the MOU marks the ending of the strategic isolation of Alitalia."

The signing of the MOU marks the ending of the strategic isolation of Alitalia

Francesco Mengozzi
chief executive of Alitalia

The airline, which has suffered financial problems, has been seeking a new partner since KLM Royal Dutch Airlines pulled out of an alliance last year.

In 2000, Alitalia reported a net loss of 495bn lire ($200m).

Slow profits on its international and intercontinental routes, loss of market share in Italy and an insufficient fleet have also added to its troubles.

Alitalia said in a statement that the alliances were a "substantial move forward in its turnaround process".

They would also "enable Alitalia to considerably improve its competitive edge, in line with the behaviour of the major European players", the statement said.

Cooperation

The alliances with Air France and Delta would involve cooperation in marketing and harmonisation of frequent flyer programmes, as well as the sharing of airport facilities and client services.

Air France and Alitalia also plan to build a multi-hub system between Paris, Milan and Rome, and want to win back market share in the main European markets.

Mr Mengozzi added that the Air France deal could eventually include a share swap, possibly paving the way for a merger.

Analysts, however, cast doubt on the likelihood of Air France wanting to take a stake in the debt-laden Alitalia, which is also 53% owned by the Italian Treasury.

Nevertheless, investors welcomed the decision by Alitalia's board and sent the company's shares up 2% to 1.45 euros in early afternoon trading.