Air France-KLM hopes for 'friendly' revived Alitalia

Warns relationship could end if 'hostility' from Italian carrier

(ANSA) - Paris, May 20 - If Abu Dhabi-based carrier Etihad invests in Alitalia and the result is not "friendly", then Air France-KLM would be forced to reconsider its connection with the Italian airline, the chief executive of Air France said Tuesday.

But Alexandre de Juniac added that if Etihad's investment in Alitalia goes ahead and leads to a "friendly" operation, then Air France-KLM can continue its own relationship with the Rome-based airline. "If the Etihad operation will not be friendly and there will be hostility, we will consider whether to withdraw in a significant way" from the Paris-based carrier's stake in Alitalia, de Juniac said in response to a question at a shareholder's meeting. But, he said, if the relationship is cordial, then "a very positive partnership" can follow, he said. Etihad, flag-carrier of the United Arab Emirates, and Alitalia are reportedly coming close to a deal that would see Etihad invest as much as 500 million euros into cash-starved Alitalia. But Etihad has reportedly made strict demands on reducing Alitalia's debt and workforce, which has slowed final negotiations.

Struggling Alitalia put forward a restructuring plan last fall that included measures to boost competitiveness but also required an increased investment by stakeholders. However, at that time, Air France-KLM decided that it would not invest beyond its existing stake of about 25%, but said it remained committed to its eight-year partnership with Alitalia signed in 2009.

The conditions reportedly set by Etihad now are "similar, in fact probably more stringent" than those put forward last fall by Air France-KLM in exchange for a greater investment in the Italian carrier, said de Juniac. Last fall's government-engineered 500-million euro Alitalia restructuring plan included a 300-million-euro capital increase and 200 million euros in new lines of credit. The French-Dutch carrier voted against the restructuring plan, saying it did not go far enough to reduce Alitalia's debt.

Under the plan, Poste Italiane agreed to underwrite the capital increase to the tune of 75 million euros, while Italian banks Intesa Sanpaolo and UniCredit said they would put in up to a maximum of 100 million euros. That triggered complaints from rival European carriers that have complained that amounts to State aid, an accusation that the Italian government has denied. As a result of the restructuring plan, Air France-KLM's stake in Alitalia has slipped from its original 25% investment to something closer to about 18% at present.