LH Likely bidder for Alitalia. Create LH Hub in FCO, Layoff 2000+

Lufthansa Group's negotiators are set to visit Rome this week to discuss the condition of the Alitalia takeover. According to the newspaper, the biggest outstanding issue is the scale of workforce layoffs post-merger.

Lufthansa is the most likely contender for the takeover after the Italian government has rejected the offers of easyJet and US private equity fund Cerberus. The authorities has concluded that only Lufthansa's bid can secure long-term development of Alitalia.

The German group can pay between EUR250 and EUR300 million (USD294-352 million) depending on which assets it will be taking over. The offer only includes Alitalia's aviation part, as Lufthansa is not interested in purchasing its ground handling unit. Lufthansa intends to trim down Alitalia's fleet from the current 115 active aircraft to around ninety and focus on developing its long-haul operations out of FCO, which would become the group's fifth primary hub after FRA MUC, VIE and ZRH.

The government wants to close the deal by the end of January, at least two months before the parliamentary elections. While Lufthansa's offer is satisfactory on many levels, the proposed employment cuts remain the biggest bone of contention. According to an online newspaper Lettera43, however, the German group is not in a hurry to conclude the negotiations and could extend them until a new government is formed after the elections.

Lufthansa plans to reduce the current workforce of Alitalia's aviation unit from some 8,000 to around 6,000. The government accepts the need for some layoffs but does not want to see more than a thousand employees go, Lettera43 reported.

The potential deal would also include hiving off some of Alitalia's slots at FCO and MXP. The former could be then taken over by easyJet.