Air France submits low Alitalia bid, but airline accepts offer

Air France has submitted a bid to purchase Alitalia, but is offering significantly less than originally expected for Italy’s indebted and deficit-ridden airline. When it emerged that Air France is offering around 10 cents per Alitalia share (totaling $218 million), the Italian carrier’s value dropped by nearly 38 percent on the stock market. According to Bloomberg’s calculations, this was the single largest decline in value since 1994.

As an indication of Alitalia’s desperation, the carrier’s board was unanimous in accepting the French airline’s offer, as most executives now realize that selling the company is the only way to save it from bankruptcy. Nick van den Brul, an industry analyst associated with Exane BNP Paribas, still believes that Air France will succeed in scooping up Italy’s national carrier, despite the low offer and fears that the country’s new government may try to oppose the bid.

Italian unions are, by and large, unhappy with Air France’s expected purchase of Alitalia and many voters also oppose the carrier’s sale. Conservative prime ministerial candidate Silvio Berlusconi, who has indicated that he does not see Alitalia’s purchase by Air France as an ideal solution, appears to be gaining support among those who oppose the bid and he is likely to win the general elections, to be held next month.

If the Air France bid goes through, it will engage in a restructuring of the Italian airline. This includes significant job cuts, as well as a decision to transfer most of Alitalia’ operations to Rome, and shift away flights from its Milan Malpensa hub.