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Air One proposes injection of one billion euros into Alitalia

MILAN - The Italian airline Air One would inject one billion dollars up front into loss-making flagship Alitalia if it wins a takeover bid, the smaller airline’s chairman Carlo Toto said in an interview published Monday.

Air One, bidding for Alitalia against the Anglo-Dutch giant Air France-KLM, would eventually spend another 4.3 billion euros (6.2 billion dollars) to upgrade Alitalia’s ageing fleet, which Toto said is made up of ‘old planes with maintenance and fuel costs that are decidedly too high.

‘The strong point of our proposal is the planes,’ said the boss of Italy’s second largest airline. ‘We plan to renew 130 of them, at a rate of 26 new planes per year.’

He added: ‘The goal is to make the new Alitalia number four in Europe, a company that should reach financial equilibrium by 2009 and begin turning a profit in 2010.’

Regarding the sensitive issue of layoffs, Toto recognised that Alitalia staff had become ‘a bit demoralised’ but cuts would be made using ‘social softeners.’

The work force would be trimmed by 1,800 jobs to 9,300, while a further 1,000 positions would be cut from the 8,300-strong Alitalia Servizi, responsible for the ground service and maintenance operations, Toto said.

Air One’s bid is backed by Italian banking giant Intesa Sanpaolo, Nomura of Japan and the US funds Goldman Sachs and Morgan Stanley.

Air France-KLM also unveiled its plan for Alitalia on Monday, saying it had offered a share swap and, like Air One, planned a major upgrade of the airline’s fleet.

Air France-KLM said in a statement that it would launch a capital raising exercise for at least 750 million euros, adding that upgrading Alitalia’s fleet ‘would be first among its priorities.’

The Italian government, which holds 49.9 percent of Alitalia, has been seeking a buyer for the airline which is losing around one million euros a day.