Italy Picks Delta, Air France-KLM to Privatize Flag Carrier ITA Airways -- Update

By Mauro Orru

The Italian government said Wednesday that it would hold exclusive talks with Delta Air Lines Inc. and Air France-KLM to privatize ITA Airways, as Prime Minister Mario Draghi pushes for a deal before the end of his mandate ahead of elections in September.

Italy's finance ministry said that a bid from the consortium, that also includes investment firm Certares Management LLC, emerged as the most suitable as the government seeks to hand over control of ITA Airways, Italy's reincarnated flag carrier that succeeded loss-making Alitalia.

"At the end of exclusive negotiations, binding agreements will be signed only if the outcome is fully satisfactory for public shareholders," the ministry said in a statement.

The consortium beat a rival offer from MSC Mediterranean Shipping Co. and Germany's Deutsche Lufthansa AG.

A spokesman for Lufthansa said the carrier had taken note of the Italian government's decision.

"Our joint offer together with MSC was the better solution for ITA, from our point of view. Apparently, a path is now being chosen that allows for more state influence and does not provide for a complete privatization of ITA," the spokesman said.

MSC didn't respond to a request for comment.

ITA Airways launched operations in October last year with less than half of Alitalia's fleet as it focused on profitable routes.

Alitalia had been loss-making since 2008. By 2017, the airline had lost access to credit markets and the Italian government stepped in with loans worth hundreds of millions of euros, placing Alitalia into special bankruptcy proceedings under Italian bankruptcy law.

For months, the Draghi administration has been seeking a partner or buyer for ITA Airways in an effort to reduce state influence. Mr. Draghi said during a press conference earlier this month that he wouldn't "leave the ITA Airways question with a new government," insisting he would find a winner "in a short time".

Mr. Draghi tendered his resignation in July after his coalition collapsed because of differences over how to respond to the fallout of the war in Ukraine. The country is heading for elections at the end of September.

Write to Mauro Orru at [e-mail]; @MauroOrru94

(END) Dow Jones Newswires

August 31, 2022 07:07 ET (11:07 GMT)

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