Friday, October 18 09:21:10
The ISEQ is up a little this morning at 4364, a rise of 10 points as markets are positive about Chinese growth figures for the 3rd Quarter.
European Airlines continue to consolidate according to Goodbody Stockbrokers:
Commentary from Air France-KLM CEO, Alexandre de Juniac, would appear to imply that a takeover over of Alitalia could be on the cards in the near future. He noted that Alitalia should be "integrated into a group like ours and integrated means that we should be in a situation to control it". He also stated that Alitalia needs a "vigorous industrial restructuring" and a "significant financial overhaul". There was much speculation in the media yesterday about what a restructuring at Alitalia would look like. Local press reports suggested that 22 aircraft (A320s/Embraers) could be grounded and 2000 staff let go (not enough in our view). We estimate that taking out 22 aircraft could put up to 5m short haul passengers up for grabs, with Ryanair and easyJet the most likely suitors. Sales at Alitalia have been collapsing in recent weeks due to fears over the airline's imminent failure and these are sales that could be difficult to recover, even if the carrier does survive. According to the minutes of a recent board meeting, Alitalia was worth just E50m before the capital injection received from shareholders and new investors. In that context, the E500m bailout looks like a lot to pay for a suffering airline. In our view, Air France-KLM should only takeover Alitalia if the airline is allowed to enter bankruptcy, under which circumstances the airline could be stripped to the bone with the brand, the long haul network and a few short haul trunk routes kept intact and integrated. Taking Alitalia in its current form and injecting capital would most likely lead to further heavy negative returns according to Goodbody Stockbrokers.