Possible takeover of Alitalia by Air France?

Air France/KLM, the airline group that's the largest in Europe, said yesterday that it was in talks with Alitalia about a possible takeover of the Italian flag-carrier. Alitalia is half-owned by the Italian government, and hasn't made a profit since 1998, but has instead remained flying over the past few years due to government bailouts.

A potential problem that stands in the way of the airline's profitability is the fact that it has two main hubs: one in Milan and one in Rome. Most European airlines, by comparison, really have one main hub: British Airways in London, Lufthansa in Frankfurt, Air France in Paris, Iberia in Madrid, etc. Alitalia also has to deal with a bunch of new start-up airlines as well.

The chances of such a takeover aren't very good. The Italian unions have voiced their displeasure, as has the Italian prime minister, Romano Prodi. "I would like to know Air France’s real intentions. Does it want to create a big European transport group in which Italy would also have a place, or simply grab the Italian air transport market, which is large and very lucrative?” he said in the French newspaper Le Figaro.

Air France and Alitalia are already members of the SkyTeam Alliance.