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Last Updated: Tuesday, 3 April 2007, 09:31 GMT 10:31 UK
Russians join race for Alitalia
Aeroflot plane
Could Aeroflot speed to the rescue of Alitalia?
Russian airline Aeroflot has emerged as a surprise contender to take control of Italian carrier Alitalia.

Aeroflot is teaming up with Italian bank Unicredit to bid for the 39.9% stake in the struggling business which the government plans to sell.

Aeroflot operates more than half of Russia's international flights and now has a market value of $3.2bn (1.6bn).

It faces competition from two other bidders in the auction, which ministers hope to complete by July.

Italian identity

Italy's finance ministry confirmed that three groups remained in the running to acquire the bulk of its 49% stake in Alitalia, down from the 11 which originally expressed interest.

The auction is likely to trigger a full takeover bid for the airline, whose losses worsened to $540m last year.

Aeroflot is really showing interest in this project
Lev Koshkyakov, Aeroflot deputy chief executive

The government believes new investment will reinvigorate the airline.

As well as meeting the government's asking price, the bidders are required to retain the firm's Italian identity and continue to operate key routes, both within Italy and abroad.

Contenders also include a finance consortium featuring Italian bank Mediobanca and private equity firm Texas Pacific Group.

The bid shortlist is completed by AP Holdings, a company with close links to Air One, Alitalia's largest domestic competitor.

The interested parties must submit non-binding offers by 16 April.

Flush with cash from soaring exports of oil and gas, Russia has been expanding its aviation interests. State-owned bank VFS bought a 5% stake in EADS, the company which owns Airbus, late last year.

"Aeroflot is really showing interest in this project," said Lev Koshkyakov, Aeroflot's deputy chief executive. "Talks on the issue have taken place and we've made an offer."

Other partners?

Were the Aeroflot consortium to succeed, the Russian airline could conceivably end up controlling the bulk of the airline with Unicredit owning a minority interest.

However, there is speculation that another European airline, such as Air France or Lufthansa, could team up with Aeroflot. Air France owns a small stake in Alitalia and has been linked with a possible bid in recent months.

Alitalia's business has been buffeted by rising costs, particularly for aviation fuel, and stiff competition from low-cost carriers.




SEE ALSO
Five bidders now eyeing Alitalia
14 Feb 07 |  Business
Aeroflot contract to boost Airbus
15 Mar 07 |  Business
Alitalia warns of widening losses
29 Jan 07 |  Business
Air France boss leaves Alitalia
17 Jan 07 |  Business
January deadline for Alitalia bid
29 Dec 06 |  Business

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