PARIS (The Deal) -- Air France-KLM on Thursday, Oct. 31, revealed that it has written off the value of its 25% stake in Italy's Alitalia, casting doubt on its willingness to invest further in the struggling airline.
The move comes after Alitalia shareholders earlier this month voted in favor of a 300 million euros ($413 million) capital increase, part of a 500 million euros rescue package needed to boost cash reserves at the loss-making carrier.
"Following to this decision, Air France-KLM has fully depreciated its Alitalia shares," the company said on announcing third-quarter results. "The group, recorded its share of loss of Alitalia and a provision for impairment, for a total amount of 202 million euros."
Air France-KLM has not said if it will participate in Alitalia's capital increase despite a series of meetings between executives of the two airlines and a September invitation from the Italian government to increase its stake to as much as 50%.
Alitalia has failed to make a profit since it emerged from bankruptcy in January 2009 even though it has dismissed about half its workforce and abandoned a host of low-margin and loss-making routes. Its cash reserves had fallen to 128 million euros at the end of June, including unused loans.
The Rome-based airline's rescue package has received backing from Italian banks Intesa Sanpaolo and UniCredit, which have pledged to fund as much as 100 billion euros of the capital increase and make a further 100 million euros of loans. In addition, Poste Italiane SpA has agreed to guarantee 75 million euros of the capital increase. The involvement of the state-controlled postal service could delay the rescue package, since the European Commissions will likely submit the plan to a state aid investigation.