Progress on salvage plan for Alitalia

Italian bankers who have been working a plan to salvage Italian flagship carrier Alitalia are reportedly close to a finalizing a package that would maintain Italian ownership of the airline, but see it flying a greatly-reduced network, and partnering with a major European airline.

The plan would merge Alitalia’s healthier business aspects with Air One, an Italian airline that is smaller and privately owned, according to an insider who was not authorized to speak publicly on the details.

Alitalia’s less healthy, and unprofitable, parts and much of the current debt it carries, would be transferred to another entity that would be authorized to sell assets to reduce the $1.5 billion in debt – such as land that surrounds Rome’s Fiumicino Airport in Rome – according to the same source. It is anticipated that the Italian government would assume the balance of the debt.

A combined Alitalia and Air One would receive an injection of $1.5 billion from several sources, including five Italian investors, two private equity companies, two international banks and two Italian banks, reported the source.

The injection of funds and restructuring plan would make it possible for Italian Prime Minister Berlusconi to assert that he has kept his campaign promise of keeping Alitalia Italian. Earlier this year, Mr Berlusconi opposed an offer by Air France-KLM, which doomed that particular deal.

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