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Alitalia risks bankruptcy without capital increase: Source

Tuesday, 8 Oct 2013 | 8:39 AM ET
Alessia Pierdomenico | Bloomberg | Getty Image

Loss-making Italian airline Alitalia risks having to file for bankruptcy if no deal on a proposed capital increase is reached in a couple of weeks, a government source said on Tuesday.

Alitalia needs about 500 million euros ($680 million) to keep going and invest in a new turnaround strategy, analysts have said, after accumulating losses of more than 1 billion euros and debt of a similar size since being privatized in 2009.

Its shareholders will vote on a capital increase of at least 100 million euros on Oct. 14 to help to keep the company in business.

"Alitalia risks filing for bankruptcy if no solution on the capital increase is found in a couple of weeks," the source told Reuters.

(Read more: Telecoms industry in 'eat-or-be-eaten' mode)

The group has come under increasing pressure and has also fallen behind in its payments for fuel, suppliers have said.

"In four or five days Alitalia risks not being able to fly," the source added.

An Alitalia spokesman was not immediately available to comment.

Italy's government and Alitalia shareholders have been betting on Air France-KLM raising its stake from 25 percent and possibly even taking control of the group, but there are disagreements over financial commitments and a business strategy for the Italian group should a merger go ahead.

(Read more: High fliers: The world's fastest-growing airlines)

Alitalia shareholder and Deputy Chairman Salvatore Mancuso was quoted on Monday as saying he was not in favor of a takeover by Air France-KLM, which he said would result in significant job cuts and a deep restructuring of the Italian flag carrier's operations.

"This is a tug of war over the price," said Andrea Giuricin, a transport analyst at Milan's Bicocca University. "Air France-KLM would like to buy Alitalia as cheaply as possibly, preferably without having to take on its debt, while the Italian shareholders want to get something out of this as well."

The government is meeting again with Alitalia's management on Tuesday to find a bridging solution for the carrier, which it considers a strategic national asset, after similar talks on Monday ended in a stalemate.

A separate Alitalia board meeting has been scheduled for later on Tuesday.

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