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Delta, Air France-KLM Eye Majority Stake In ITA Airways - Paper

By Dave Simpson

Delta Airlines and Air France-KLM have teamed up with an unidentified fund to express an interest in a majority stake in ITA Airways, daily La Repubblica said on Thursday 10 March, setting the stage for a potential bid battle for the successor to Alitalia.

Details

The expression of interest was presented to Italy's government in a letter, the paper said, citing a government source.

A further expression of interest arrived from another international fund which is already invested in low-cost carriers, the paper added.

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A Delta DAL.N spokesperson said the U.S. airline had regular contact with the ITA leadership but did not comment directly on the report.

"Delta has a longstanding history with the former Alitalia and has created a partnership with ITA Airways which Delta is committed to strengthening," the spokesperson said.

Air France-KLM AIRF.PA also declined to comment on the report, reiterating it was committed to deepening cooperation with ITA. It was often seen as a potential partner for Alitalia but nothing ever came of the speculation.

The Italian government had no immediate comment.

Air France-KLM and Delta both have codeshare partnerships with ITA, the slimmed down successor to Alitalia which started operations last October.

Shipping group MSC said in January it had joined forces with German airline Lufthansa LHAG.DE to an express an interest in ITA as the Italian government looks to reduce its stake.

Air France-KLM To Seek Up To €4bn To Repay State Aid, Shares Sink

In other Air France-KLM-related news, the above news followed news that Air France-KLM AIRF.PA plans to raise up to €4 billion as it seeks to repay state pandemic handouts, the airline has said, overshadowing robust earnings on a recovery in air travel and sending its shares down by approximately 4.5%.

The airline - which in 2020 received €10.4 billion in loans backed by France and the Netherlands, its two biggest shareholders - confirmed the need for a cash call it had been mulling in October at the time of its third-quarter results.

However it gave no detail about the terms and timing of any fundraising. "Air France-KLM intends to remain flexible on the transaction structures, as well as on the sequencing and the sizing of each instrument depending on market conditions," it said.

The money to be raised compares with the group's current market value of just below €3 billion.

The fourth-quarter performance was helped by a recovery in transatlantic travel, as the United States reopened to vaccinated travellers in November.

The group added it had started to see a pickup in bookings this quarter as Omicron restrictions start to ease.

Fourth quarter core profit or EBITDA reached €827 million, up from a Q3 figure of €796 million and the second straight quarter of profitability at that level since the outbreak of the pandemic.

Increased Capacity

For the year EBITDA reached €745 million, beating analysts forecasts, and the company's own guidance of a "slightly" positive figure.

Steven Zaat, chief financial officer, said the airline increased capacity on long-haul in the fourth quarter despite a resurgence of coronavirus cases due to the Omicron variant, which hurt short- and medium-haul travel in Europe.

For the first quarter of this year, the company forecasts EBITDA to break even, while available seat kilometres for the group's network passenger activity is seen at 73%-78% of 2019 levels, with the quarter impacted by the Omicron variant and a slowdown of business travel as companies still predominantly exercise a work-from-home model.

"We do not believe competition will sit on its hands, so high yields might not be reached, especially as business travel continues to suffer," Mulder added, referring to the group's ambition to reach 2019 capacity levels by 2024 and an "ambitious" outlook on margins and debt.

Since last week, however, Zaat said bookings have started to catch up, including for the summer period.

The company posted a better-than-feared net loss of €3.29 billion. Revenue of €14.32 billion outpaced the average estimate in a Refinitiv poll of €13.97 billion.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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