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Last Updated: Thursday, 23 November 2006, 13:15 GMT
Leaders discuss Alitalia future
Alitalia plane
Alitalia is considering its options
Jacques Chirac and Romano Prodi are to discuss the future of troubled Italian airline Alitalia amid talk of a possible merger with Air France-KLM.

Loss-making Alitalia is on the hunt for strategic partners and speculation has focused on Air France-KLM, which holds a small stake in its counterpart.

Air France boss Jean-Cyril Spinetta said an alliance, if efficiently executed, would be beneficial.

But Italian Prime Minister Prodi said he had reservations about any tie-up.

Benefits

Air France-KLM has previously insisted it would only be prepared to deepen its relationship with Alitalia if the airline was privatised and its finances restructured.

Chief executive Jean-Cyril Spinetta confirmed the airline was in talks with its Italian counterpart about its restructuring plan and what savings could be generated from a possible alliance.

I have always supported contacts between the two groups but now I have a lot of doubts
Romano Prodi, Italian Prime Minister

"I am of the conviction that a tie-up between the two groups would create value," he said.

"Air France-KLM is proof that the merger of companies from different countries can create value."

An aviation adviser to the Italian government has said Alitalia should be willing to buy a substantial number of aircraft from Franco-German planemaker Airbus in return for Air France investing in its business.

Concerns

But ahead of Thursday's meeting with President Chirac, Mr Prodi said he was concerned about Air France's motives for any such arrangement.

"I have always supported contacts between the two groups but now I have a lot of doubts," he told French newspaper Le Figaro.

"Does it [Air France] want to create a big European transport group in which Italy would have a place, or simply grab the Italian air transport market, which is large and very lucrative."

Air France shares fell 7% on Thursday on worries about a possible deal with Alitalia and a sharp fall in its quarterly profits.

Profits slipped to 374m euros (253m) in the three months to the end of September, from 717m euros in the same period last year.

But excluding one-off gains made last year from the sale of a stake in ticket reservation system Amadeus, profits actually rose 25%.

Alitalia has held talks with a number of leading airlines, including Thai Airways, about forming strategic partnerships.

Thai Airways said on Thursday that it had made a $41m loss in the past three months, due in part to the cost of moving its operations to Bangkok's new Suvarnabhumi airport.


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SEE ALSO
Fresh losses at troubled Alitalia
13 Nov 06 |  Business
EU tells Alitalia not to seek aid
11 Oct 06 |  Business
Air France mulls budget service
17 Nov 06 |  Business

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