Aviazione News

More than a year after the Italian government launched its plans to sell Alitalia, the beleaguered state-controlled airline has agreed to a takeover bid from Air France-KLM. But the offer has fallen far short of what Alitalia and its investors were hoping for.

Shares in the Italian airline plummeted 24.5%, or 13 euro cents (21 cents), to 40 euro cents (63 cents), on Monday morning in Milan, in reaction to the board’s acceptance of Air France-KLM’s offer for 100.0% of the company on Sunday. Shares were eventually suspended in late morning trade.

Air France-KLM (nyse: AKH – news – people ) is offering one of its shares for every 160 of Alitalia’s, which values the carrier at 139 million euros ($219.3 million)–that’s an 81% discount to Friday’s closing price. This was even lower than what had been expected, given Alitalia’s precarious financial position. The airline loses around 1 million euros ($1.6 million) a day and has cash reserves of just 282 million euros ($444.9 million).

Also, while Alitalia (other-otc: ALAIF – news – people ) is closer to a takeover that it has ever been, the deal is still far from guaranteed.

Not only must Alitalia’s powerful unions support the deal, but the Franco-Dutch airline’s offer is conditional on a new Italian government not doing anything drastic to intervene. Italy will be holding parliamentary elections on April 13 and 14, following the resignation of Prime Minister Romano Prodi in January, and is widely expected to see the return of Silvio Berlusconi.

The billionaire politician has criticized the sale of Alitalia to foreign buyers, saying he favours an Italian solution. Government backing for the deal is essential, as the state control 49.9% of the carrier. Air France-KLM has asked the government to provide Alitalia with an emergency line of credit that would be repaid after the takeover, once the bidder gave the company a 1 billion euro ($1.6 billion) capital injection.

Air France-KLM is planning to cut 1,600 jobs at Alitalia, according to Italian press reports, much to the fury of unions. It is also planning to make Rome’s Leonardo da Vinci airport the airline’s only hub, which would involve cutting back its operations at Milan’s Malpensa airport, which regional politicians have argued would be devastating for Milan’s economy.

“It’s an unconditional surrender,” Fabrizio Solari, head of Italy’s national trade union, CGIL told daily newspaper La Republica on Monday, which added that Anpac, a pilots’ union, has announced it is ready to fight the sale. According to TradeTheNews.com, even Italy’s infrastructure minister said the deal harmful for the company and the country.