KLM hit by Alitalia damages claim

The ruling will dent KLM's finances

A court has ordered Dutch national airline KLM to pay its Italian counterpart Alitalia 250 million euros as a penalty for walking away from an alliance between the two carriers.

We are not pleased at all

KLM spokesman

KLM backed out of the three-year old alliance in April 2000 because of the slow pace of Alitalia's privatisation and delays in developing Milan's Malpensa airport.

The Dutch arbitration court on Tuesday backed Alitalia's claim for 250 million euros in damages, but ordered the Italian airline to refund 100 million euros that KLM had invested in Malpensa.

The arbitrators also rejected a separate 43 million euro compensation claim from Alitalia.

KLM said the decision would have a "significant negative effect" on its finances this year.

Share price slide

The airline's shares fell more than 8%, while Alitalia's stock rose by the same amount.

"We are not pleased at all," a KLM spokesman said, adding that the firm was "looking at all possibilities to reduce the impact of this ruling."

Alitalia, which had set aside 100 million euros to meet possible claims from KLM, welcomed the ruling.

"The decision, while obviously satisfying for us, does not change our intention to look to the future rather than the past in our relations with KLM," Alitalia chief executive Francesco Mengozzi said in a statement.

The KLM/Alitalia link-up allowed the two airlines to save costs by sharing services such as ticket sales and baggage handling.