Alitalia’s Higher Loss Risks Deterring Air France Investment

ET France Takes Delivery of First Airbus A400M Military Transporter Text By Matthew Curtin The French air force Monday received the first of 50 new-generation military transport aircraft made by Airbus, a milestone for the manufacturer and the European governments backing the A400M whose development was dogged by engineering problems, cost overruns, and delays. Airbus has commitments to deliver 170 A400Ms to France, Germany, Britain, Turkey and three other European countries. Airbus parent European Aeronautic, Defence & Co. has taken around 4 billion euros ($5.4 billion) in write-downs on the EUR20 billion program after spending five years trying to fix the engineering glitches. The four-engine turbo-prop plane is entering service a decade after the project was launched. Airbus hopes it can turn the plane from a financial liability into a marketing asset by notching up new sales in Asia, the Middle East and Latin America, even as budget cuts in Europe have capped potential sales nearer home. Malaysia has four of the planes on order. Company executives reckon that the next three decades will bring orders for up to 400 military cargo and troop transporters. EADS Chief Executive Tom Enders acknowledged the A400M program had been no “walk in the park” but said Airbus would continue to work closely with governments to meet defense needs at a time of increasing budget constraints. Mr. Enders was speaking at a ceremony at the A400M’s final production site in Seville, Spain.

France Takes Delivery of First Airbus A400M Military Transporter

Alitalia, which has been been losing money amid a weak Italian economy and competition from discount carriers, has undergone a management reshuffle this year after Chief Executive Officer Andrea Ragnetti resigned in February following widening losses. Clearly the mounting losses pose a challenge, said Donal ONeill, an analyst at Goodbody Stockbrokers. Despite the apparent synergies it may have with Alitalia, it would be deleterious, in my view, for Air France-KLM to invest in a business that faces significant competitive threat on both its long haul and short haul operations. Convertible Bond Air France declined as much as 1.6 percent to 7.22 euros and traded at 7.25 euros as of 10:57 a.m. in Paris, valuing the airline at 2.2 billion euros ($3 billion) The Italian airline proposed investors boost funding by completing a subscription of 55 million euros through a bond convertible into stock. 14 to vote on the increase. Air France members on the Alitalia board opposed the plan, news agency Ansa reported, without saying where it got the information. An Air France spokesman declined to comment. Air France said Sept. 23 it would await more information from the Italian carriers board before committing to any move. Hiring Advisers The relatively small capital increase being sought suggests the move is only a short or mid-term solution, said Yan Derocle, an analyst at Oddo Securities in Paris. Air France has hired Lazard Ltd. (LAZ) and Mediobanca SpA (MB) as advisers to consider its options on Alitalia, Italy s Messaggero reported this week, without saying where it obtained the information.