KLM, ALITALIA TERMINATE ALLIANCE

KLM, ALITALIA TERMINATE ALLIANCE    KLM Royal Dutch Airlines has terminated its comprehensive alliance with Alitalia after the two carriers failed to resolve conflicts concerning Milan’s new Malpensa airport and Alitalia’s privatization.
   The joint ventures set up to manage the carriers’ combined passenger and cargo networks have been dissolved, and Alitalia must pay KLM 100 million euro for the Dutch carrier’s investment in Malpensa. “The termination should have no immediate effect on passengers or cargo shippers,” KLM said.
   KLM, which recently announced a major restructuring program to cut costs and boost profitability, said continuing the alliance “constitutes an unacceptable business risk, which could jeopardize its financial position, the development and profitability of its own company, and its attractiveness as an alliance partner.”
   Under the alliance agreement signed in late 1998, KLM reserved the right to end the partnership if development of Malpensa was delayed or if the Italian government failed to privatize Alitalia by June this year. The transition of flights from Milan’s Linate airport to Malpensa has been anything but smooth. European airlines have complained to regulators that they are being squeezed out of Linate, which is closer to Milan, and forced to adhere to restrictive environmental regulations at Malpensa.
   “It has become apparent during the past months that the necessary guarantees for the future growth and development Malpensa were insufficient,” KLM said.
   The Italian government has continually postponed the Linate-Malpensa transfer. It also has delayed Alitalia’s privatization.
   KLM said it will focus on its restructuring and “actively consider other strategic options.”