Alitalia appeared more than ever en route to bankruptcy on Thursday after its proposed sale to Air France-KLM ran into political turbulence and unions insisted on having the right to re-negotiate the merger terms.
Center-right leader Silvio Berlusconi, who polls indicate is in the lead to become the next premier, has abandoned his previously neutral position and branded the Air France-KLM offer as ''arrogant and unacceptable''.
He said Italian businessmen and banks should feel a ''sense of duty'' to join together to buy Alitalia. According to the ex-premier, the offer could be led by Italy's biggest private carrier Air One with the financial front coordinated by Banca Intesa, Italy's number two bank.
Berlusconi also phoned outgoing Premier Romano Prodi urging him to approve a stop-gap or bridge loan from the state to allow time for an all-Italian offer to be drawn up and presented for Alitalia.
Some observers have criticised Berlusconi for exploiting Alitalia for electoral purposes and believe that no Italian offer is on the horizon.
The Treasury issued a statement on Thursday to warn against ''destroying an existing offer rather than creating a new one''. ''Anyone interested in Alitalia should step forward with a formal and concrete offer. Time is running out and cannot be dictated by political agendas,'' the Treasury added. Air One, with Intesa's backing, lost out to Air France-KLM in December as Alitalia's preferred talking partner in exclusive negotiations for the Treasury's 49.9% controlling stake in the national carrier.
After trying and failing in court to stop the Alitalia-Air France-KLM talks, Air One promised to present a new offer.
However, no such offer has been made despite the government's assurance that all viable offers would be taken into consideration.
Intesa, meanwhile, appears to be caught up in the international credit crunch, caused by the subprime crisis, and on Thursday issued a statement to say that Alitalia was not on its agenda.
According to CEO Corrado Passera, Intesa has not been involved in any bid for Alitalia since December and, in reference to Berlusconi's statements, added ''we have never invested in something just because someone called on us to do so''. In their phone conversation, Prodi recalled to Berlusconi that the European Union had made it clear that Alitalia could not receive fresh state aid unless the question of the carrier's future had been resolved with a concrete offer for the Treasury's stake.
Unions met Thursday morning with Alitalia CEO and reiterated their opposition to the Air France-KLM plan unless layoffs and timetables could be re-negotiated.
Prato is reported to have told the unions that while there was little if any room to negotiate the Franco-Dutch offer, it was an ''industrially solid'' offer and the only one on the table ''despite all the hoopla in the press''.
While expressing a readiness to meet again with Air France-KLM management, even next week, the unions said this could only take place if concessions were possible.
They also wanted Air France-KLM to extend its March 31 deadline for approving the merger and called on the government to extend a loan to Alitalia to allow it to continue to operate.
Unions also said that they would not be swayed by threats of placing Alitalia into receivership Economy Minister Tommaso Padoa-Schioppa warned this week that if the Air France-KLM offer did not win approval the only alternative would be to place Alitalia in receivership.
Many observers believe that receivership would be much worse for Alitalia and its staff than merging with Air France-KLM.
Once in receivership, Alitalia would have to first have to stop accumulating debts, which it currently does at about a million euros a day, and this would entail cutting spending in four key areas: leasing aircraft, buying fuel, insurance and salaries.
According to one hypothesis, reducing leasing and fuel costs would ground 50 out of the 174 planes Alitalia currently operates, eight more than the reduction envisioned in the Air France-KLM plan.
This in turn would force a drastic reduction in staff, some 3,000 pilots and cabin crew and another 2,000 ground service and maintenance staff for a total of 5,000, more than double the 2,100 layoffs contained in the Air France-KLM plan.
Alitalia would then be put up for liquidation and its assets, including planes, routes and slots, sold to help pay off the airline's debts of some 1.4 billion euros.
Aside from a hypothetical domestic alliance of investors, the airline could even end up in the hands of Air France-KLM or Germany's Lufthansa without the obligation not only to assume Alitalia debt but also maintain its logo, brand and Italian 'identity'.
