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Aeroflot makes bid for Alitalia

Stephen Beard Apr 3, 2007

Aeroflot makes bid for Alitalia

Stephen Beard Apr 3, 2007

KAI RYSSDAL: The Italian government’s looking to get out of the airline business. And you can’t really blame ’em. Alitalia, the state-owned carrier, has been on an extended losing streak. It’s finished in the red six of the past seven years.

But the potential buyer’s raising some eyebrows. The Russian airline Aeroflot has joined the bidding. Aeroflot’s state-owned, too, of course. So the deal would mean doing business with the Kremlin.

From the Marketplace European Desk in London, Stephen Beard reports.

STEPHEN BEARD: The Italian government seems desperate to bale out of Alitalia. The airline has become a black hole for taxpayers’ cash. It lost half a billion dollars last year.

David Learmount of Flight International magazine says the government is right to offload the bulk of its 49 percent stake, and selling it to a group controlled by Aeroflot would make perfect sense.

DAVID LEARMONT: The internbational division of the airline, first of all, has over the very long term an absolutely world class safety record. Operationally speaking it’s always been a first class airline. That is, the international division has been, and that’s what we’re talking about here.

It’s Aeroflot’s domestic operations that have a terrible record for safety and service, he says.

But there are other worries about Aeroflot taking a large stake in Italy’s national carrier.

Aeroflot is controlled by the Kremlin, says analyst Nick Redman. And President Putin has used Aeroflot politically. For example, to punish the U.S.

NICK REDMAN: The clearest indication we have of that was very recently, when Aeroflot decided to place an order specifically on the Kremlin’s instructions for Airbus jets over Boeing.

The bid for the Alitlia stake is part of a trend of Russians awash with oil money buying European assets. But Redman says there are some reservations here.

REDMAN: I think also there will be some doubt until Russia shows itself a little bit more open to foreign investmnent in some of the sensitive sectors of its own economny.

But the Italian government seems more keen to offload its stake in Alitalia than fret about Putin’s methods and motives.

In London, this is Stephen Beard for Marketplace.

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