The Wall Street Journal-20080204-Alitalia Sale Derailed by Political Upheaval

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Alitalia Sale Derailed by Political Upheaval

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Alitalia, Italy's cash-strapped national carrier, is maybe the most obvious -- but certainly not the only -- casualty of Italy's protracted political crisis. The government, which owns 49.9% of Alitalia SpA, had been trying to close a sale of the airline to Air France-KLM SA in order to prevent a financial collapse.

But Prime Minister Romano Prodi was forced out last month, putting the fate of the deal, and the airline itself, in doubt. The sale requires approval of the cabinet, but amid Italy's political deadlock, it isn't clear who might be in power, and whether a new government might try to block a sale of Italy's flagship carrier to a foreign company.

Since Mr. Prodi's resignation Jan. 24, after losing a vote of confidence in the Senate, the country's political forces have been at odds over how to proceed.The period of political limbo could extend for months. In cases like these, the departing government, even though it has been voted out of power by Parliament, officially remains in place, but it does very little in the way of passing legislation or deciding new policy.

Last week, Alitalia Chairman Maurizio Prato warned that the airline needed a cash injection of at least 750 million euros ($1.11 billion) to reverse "unsustainable losses."

Alitalia's management said delaying a sale could lead to a collapse. Alitalia's board said in December that an alliance with Air France-KLM was the best solution. That decision set off protests from politicians who insisted Alitalia sell to Air One SpA, a smaller, Italian-owned carrier being backed by one of the country's largest banks, Intesa Sanpaolo SpA.