Alitalia Secures €500 Million in New Funding, Avoids Bankruptcy
Alitalia narrowly avoided near-certain bankruptcy this weekend after its board of directors approved €500 million in new funding on Friday. The struggling Italian airline was able to convince its shareholders, which include Air France-KLM, and creditors to support additional funding measures after receiving a commitment from Poste Italian, the state-owned post office, for €75 million.
The Italian government’s support through Poste Italiane was crucial to getting Air France-KLM to approve the new funding. In a statement released Friday, Alitalia said its board approved a proposal to raise €300 in new capital and to open €200 million in new lines of credit, part of which will come from a bank that is a shareholder and holds a seat on the board.
Without the turnaround plan, the Italian flag carrier had faced being cut off by a major fuel supplier as well as a warning from the Italian civil aviation authority that it might ground the airline. Since emerging from bankruptcy five years ago, Alitalia has been consistently unprofitable.
Alitalia’s shareholders will meet on Monday in a special session to vote on the proposed capital increase.
The news of the rescue plan met with mixed reactions, especially by the airline’s competitors. British Airways’ parent International Consolidated Airlines Group called on the European Commission to “suspend this manifestly illegal aid,” terming it a “protectionist” move that “undermines competition and favors failing airlines.”
Air France-KLM acquired 25% of Alitalia in 2008 for 323 million euros and holds 4 seats on its board.
(Photo: Accura Media Group)