Air France-KLM Board Approves Plan for Alitalia Bid

Air France-KLM Board Approves Plan for Alitalia Bid

March 10 (Bloomberg) -- Air France-KLM Group SA, the world's biggest airline, won approval from its board to make a binding bid for Italian state-controlled carrier Alitalia SpA.

The bid would have ``suspensive conditions,'' including acceptance by Alitalia's unions, Air France, which has the airline industry's largest revenue, said in an e-mailed statement. The Paris-based airline is in exclusive takeover talks to buy Alitalia and today won its board's approval to submit a bid on March 14.

The bid ``will allow Alitalia to recover its status of being national leader,'' Air France said in the statement.

Prime Minister Romano Prodi's administration picked Air France in December over domestic rival Air One to start exclusive takeover talks. The collapse of Romano Prodi's government in January revived opposition by some northern Italian regional officials to Air France's plan, which supports Alitalia's strategy of scaling back operations at Milan's Malpensa airport.

Air France said Dec. 17 that it would offer to buy all of Alitalia in a stock-swap that valued the carrier at 35 cents a share, less than half its current value at the time. Air France would also underwrite a 750 million-euro ($1.15 billion) sale of new shares as part of an investment plan worth 6.5 billion euros.

Air France already owns 2 percent of Alitalia and the two carriers are partners in the SkyTeam alliance. The French carrier has said it would eliminate 1,500 jobs from Alitalia's airline business.

Air France has said it would replace Alitalia's old MD-80 short- and medium-haul planes by 2017 and start beefing up the fleet in 2011. Alitalia would cease trading while retaining a local identity and operating name, as KLM Royal Dutch Airlines did when Air France bought it in 2004. Italy owns a 49.9 percent stake in Alitalia and may end up as an investor in the new company.

BLOOMBERG