An Embraer passenger aircraft, operated by Alitalia SpA, prepares to take off from London City Airport in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

EasyJet Drops Out of Alitalia Bidding in Setback to Government

(Bloomberg) -- Delta Air Lines Inc. will continue to pursue a takeover of Alitalia SpA’s operations after a potential partner dropped out, leaving the Italian government with only one industry suitor willing to take the unprofitable flag carrier off its hands.

The U.S. airline said it was continuing discussions with state-controlled railway Ferrovie dello Stato Italiane SpA about taking a stake in Alitalia even after the U.K.’s EasyJet Plc formally withdrew Monday. Delta is studying an investment of 100 million euros ($113 million), newspaper Corriere della Sera said on Sunday.

“Delta confirms that it continues to explore ways to work with Ferrovie dello Stato and maintain our partnership with Alitalia in the future,” the Atlanta-based airline said in an email without providing additional details. It called Alitalia “a longstanding partner.”

A deal with Alitalia would bolster Delta’s roster of international holdings, which the U.S. carrier has used aggressively to expand its global footprint. Delta owns 49 percent of Virgin Atlantic Airways Ltd. and Grupo Aeromexico SAB, along with smaller stakes in Air France-KLM, Brazil’s Gol Linhas Aereas Inteligentes SA and China Eastern Airlines.

At Alitalia, Delta would take a 10 percent stake, which would double within four years if certain business goals are met, according to Il Messaggero.

The current options for a turnaround of Alitalia aren’t right for EasyJet, said a spokeswoman for the discount carrier. She declined further comment.

Government’s Goals

Italy’s coalition government, heading into a European Parliamentary election campaign, is seeking to demonstrate that it can find a buyer for Alitalia without resorting to the thousands of job cuts that many potential industry suitors would require. Deputy Premier Luigi Di Maio is leading the effort, and wants to avoid a liquidation that would damage the partnership between his Five Star party and the League.

Should the Delta talks founder, the only other alternative besides liquidation is to give a rescue role to Deutsche Lufthansa AG. The German carrier has signaled that it’s interested, but only if the government first cuts back on headcount. Lufthansa wants to keep no more than 60 percent of Alitalia’s workforce, people familiar with the matter said last week.

Together, Delta and EasyJet would have invested as much as 400 million euros and received a stake of as much as 40 percent in a “new Alitalia” after the Italian airline’s second bankruptcy process in a decade, the people have said.

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