Italian government approves loan for Alitalia

Business Materials 23 April 2008 01:41 (UTC +04:00)

The Italian government has approved a 300-million-euro (475-million-dollar) loan for ailing national carrier Alitalia, outgoing Prime Minister Romano Prodi said on Tuesday evening. ( dpa )

Prodi spoke at a news conference following an emergency meeting of his centre-left cabinet.

The government had been summoned to discuss the crisis at Alitalia which stemmed from Monday's decision by Air France-KLM to withdraw its bid to take over the Italian state's controlling stake in the Italian airline.

The loan was authorized by the government through a "public order" decree aimed at safeguarding the country's strategic air transport sector.

Prodi said the specific amount was requested by prime minister- elect Silvio Berlusconi, whose centre-right coalition won last week's elections.

Earlier Tuesday the European Commission cautioned the Italian government against providing any state aid to Alitalia, saying such a move would violate European Union rules.

"Alitalia has already received state aid under the one-time-last-time principle. So, until 2011, it cannot receive state aid," said Michele Cercone, the spokesman of the EU's transport commissioner.

Asked how he thought Brussels would respond to the 300 million euro loan, Italian Economy Minister Tommaso Padoa-Schioppa, speaking at the same news conference as Prodi, replied: "We shall see".

In announcing that the deal was off, Air France-KLM cited rising oil prices, as well as its failure to win support for the deal from unions representing Alitalia employees.

"Air France-KLM has indicated to Alitalia that the contractual arrangements announced on 14th March with a view to launching a public exchange offer on Alitalia were no longer valid; the conditions precedent that had to be satisfied prior to launching were not fulfilled," the French-Dutch company said in a statement.

But the French media on Tuesday also blamed the ambiguous position of Berlusconi, who during the recent electoral campaign had criticized the Air France-KLM offer and had spoken out firmly in favour of an Italian company taking over the stricken carrier.

And in a surprise move, Berlusconi said after a meeting with Russian President Vladimir Putin on Friday that Russian carrier Aeroflot might now be willing to renew its interest in Alitalia.

Aeroflot had been among six companies - including Air France-KLM, Lufthansa and Italy's second largest airline AirOne - shortlisted by the Italian government last year as potential buyers of Alitalia.

On Tuesday shares in Alitalia were suspended on the Milan stock exchange after plummeting more than 11 per cent on the news of the Air France-KLM pull-out, while shares in Air France-KLM rose in Paris.

Alitalia last received emergency state aid in 2001. Under EU rules, this can be done only once every 10 years.

This means that any new bridging loan would have to be provided at market conditions, officials in Brussels said.

According to EU rules, "the company must not receive further state aid. The European Commission has the duty to make sure the rules are respected. And that is what it intends to do," Cercone said.

Cercone noted that any assistance provided by the government to Alitalia would first have to be notified to the commission or risk being challenged in court.