NEW YORK--Alitalia SpA on Monday said its future as an
independent airline is at stake, ahead of a crucial board meeting
Thursday when the ailing Italian flag carrier will discuss raising
fresh financing.
The chief executive of the privately held Alitalia said the
airline has to decide whether to keep flying alone or become part
of a bigger airline group as it tries to improve its
profitability.
"The market is consolidating and I think there is a case for
Alitalia to move into a larger group," Andrea Ragnetti said at an
event in New York.
The latest troubles at Alitalia, which is 25%-owned by Air
France-KLM (AF.FR), came as high fuel prices and Europe's lingering
economic problems have laid low many of the region's national
airlines.
Air France is in the middle of big reorganization of its own
domestic business. Similar shake-ups involving the elimination of
thousands of jobs and the renegotiations of labor contracts are
underway at the European operations of Deutsche Lufthansa AG
(LHA.XE), Nordic carrier SAS AB (SAS.SK) and Iberia, the Spanish
airline owned by British Airways parent International Consolidated
Airlines Group SA (IAG.LN, IAG.MC).
All the airlines are struggling to run profitable short-haul and
medium-haul networks that compete with leaner discount carriers
such as Ryanair Holdings PLC (RYA.LN, RYA.DB) and feed traffic to
their long-distance flights.
"Alitalia will have to find its way in the next couple of
years," Mr. Ragnetti said, adding that Alitalia's future was in the
hands of its shareholders. Air France-KLM, the Franco-Dutch
airlines operator, is Alitalia's biggest single shareholder. The
rest of the register is made up of some of Italy's best-known
financial institutions, investors and industrial companies which
mounted a 1.1 billion euro rescue of the carrier in 2008. These
investors include banking group Intesa Sanpaolo SpA (ISP.MI) and
tire-maker Pirelli & C.S. SpA (PC.MI).
Mr. Ragnetti highlighted in a speech Monday that the U.S.
airline industry has stabilized after a series of mergers
significantly reduced the number of players in the market, and the
European market has lagged behind in consolidating.
Italian newspapers have been rife recently with reports about
Alitalia's dwindling finances. The airline has a fleet of 142
aircraft. It reported net profit of EUR27 million on a 4% rise in
revenue of EUR1.13 billion in the three months to end-September
after losses in the previous two quarters. But net debt rose to
EUR923 million from EUR862 million three months earlier.
Mr. Ragnetti decline to comment on the state of the airline's
finances or its immediate course of action. "The options are many,"
he said in an interview.
Mr. Ragnetti said the airline's focus was to try to increase
revenue rather than to cut costs.
"[Alitalia already had] one of the most competitive cost
structures in Europe," he said. "The key will be to grow revenue
and keep that cost structure unchanged."
Alitalia had had a good fourth quarter, he said, adding that he
hoped the numbers would show it breaking even. "The company has
shown to be much more resilient to the economic crisis."
Air France-KLM declined to comment but referred to earlier
remarks by Air France CEO Alexandre de Juniac who said the airline
didn't have the means to consider increasing its stake in Alitalia.
The French-Dutch airline bought a 25% stake in Alitalia for EUR323
million three years ago. Since last month, when a lock-up period
expired, Air France-KLM has an option to buy additional shares in
Alitalia.
--Gilles Castonguay in Milan and David Pearson in Paris
contributed to this article.
Write to Matthew Walter at matthew.walter@dowjones.com.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires