Alitalia clear to start sale talks

ROME, Italy (CNN) -- The Italian government paved the way for the sale of state-owned airline Alitalia to Air France-KLM after it gave its blessing to exclusive talks between the two carriers on Friday.

Italy's finance ministry has given the go-ahead for talks on the sale of its 49.9 percent stake in Alitalia to the European carrier, one of the world's largest airlines, a ministry spokesman told CNN.

The spokesman said negotiations were expected to last around eight weeks, after which Air France must submit a binding offer to be examined by the government, he said.

Alitalia has been in financial dire straits for some time. It has been losing on average around one million euros ($1.45 million) a day and owes creditors more than one billion euros ($1.45 billion).

The company's board of directors recommended the sale of the finance ministry's stake to the Franco-Dutch giant last week. The remaining shares in the company are floating.

However, the Italian government has come under political pressure at home to prevent the ownership of the national carrier from going abroad.

Unions and some government officials favored selling the struggling airline to its rival domestic airline Air One.

Alitalia pilots and flight attendants, however, threatened strike action if the government opted to enter into negotiations with Air One.

The government failed in a bid to sell Alitalia by auction last July, with bidders complaining they were denied access to the company's books and not guaranteed full control of the airline.

Air France-KLM said it would make an immediate capital increase of 750 million euros (US$1.08 billion) to revamp cabin design, in-flight entertainment and ground services "to restore Alitalia's image and its stature as an international company."

Air One, Italy's second-biggest airline, had said it planned a total investment of $7.63 billion by 2012, including a capital hike of at least $1.44 billion. E-mail to a friend

CNN's Flavia Taggiasco in Rome contributed to this report

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