Alitalia may close shop if Air France-KLM will not support new turnaround plan - report

By Rizza Sta. Ana

Sep 28, 2013 06:26 PM EDT

A report by Reuters said that troubled Italian airline Alitalia would have to close shop if it would not have enough cash to fund its new plan to turn the company around.
Since it went private in 2009, Alitalia has over EUR840 million or USD1.1 billion in losses and a EUR1 billion debt. The Italian airline would be running out of money soon.

Alitalia CEO and turnaround specialist Gabriele Del Torchio had outlined a new plan that would have the airline shift its focus to intercontinental flights. Del Torchio had said that tapping to a more lucrative market by purchasing bigger airplanes would have Alitalia break even in 2015 and start earning profit the year after that. According to sources familiar with the matter, Del Torchio would be asking for EUR200 million in new capital probably from its biggest shareholder Air France-KLM and would also be borrowing in a similar amount.

The government of Italy, on the other hand, would be relying on Air France-KLM to place a cash investment and also increase its 25% holding in the Italian airline. The capital investment of course, analysts said, would naturally have conditions. Air France-KLM may have to absorb Alitalia's debt and would need to support long term plans of Del Torchio.

Yan Derocles, an Oddo Securities analyst, said, "This is the only solution for Alitalia." 

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