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Air France soars on debut
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February 22, 1999: 9:49 a.m. ET
French airline's IPO is well received; alliance talks give Alitalia stock a boost
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LONDON (CNNfn) - Air France made a stunning debut on the Paris stock exchange Monday although the surge in the stock price reflected the sizable discount that was needed to bring the airline to the market.
The 38 million shares, which were priced at 14.2 euros ($15.67) for institutional investors and 14 euros for individuals, started trading at 18 euros, but settled at around 16.65, up 19 percent.
"The shares are doing so well because the IPO was priced so cheap," said one London-based analyst. The small volume of shares released onto the market also helped drive the price up.
The initial public offering brought 17 percent of the state-owned flag carrier to the stock market.
The demand was so huge that the shares were suspended for 15 minutes as the market opened.
"We had great fun in pre-market trading, selling the shares at over 18 euros and buying them back as the price fell," said one broker.
The flotation valued Europe's third-largest airline at 3.1 billion euros ($3.4 billion).
In a related move, press speculation that Air France was close to joining the alliance grouping that includes Northwest Airlines (NWAC), KLM, Alitalia and Continental (CAI.A), sent the Italian flag carrier's shares surging in Milan.
The exchange temporarily suspended Alitalia's shares after they surged 10 percent in the morning. The stock was up 8 percent at 3.37 euros in the early afternoon.
"It would be bloody good for all those airlines if the deal happened," said the London-based broker. He pointed out the addition of Air France could put the alliance in the number- two slot globally behind the United Airlines (AUL) and Lufthansa-led (FLHA) Star Alliance.
A KLM spokesman said he had "nothing to announce on Air France." The Dutch carrier is understood to have dropped its opposition to Air France joining the alliance in recent weeks. Alitalia told Reuters the talks with Air France were "routine" - the two carriers already cooperate on routes between their two home markets.
Any competition concerns by European regulators could well be diluted by the French government committing to further reduce its stake in the carrier, one analyst said. An alliance involving Air France, Alitalia and KLM would control around 22 percent of the European air passenger market.
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Air France
Alitalia
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