Air France-KLM and Air One both detailed their takeover plans for ailing Italian carrier Alitalia Monday, as analysts told CNBC.com that Air France was better positioned to clinch the deal.
"The best (option), from an industry point of view, is the Air France-KLM deal," John Strickland, director of JLS Consulting told CNBC.com.
"They've got global coverage and shown they can make it work," added Strickland, who cited Air France's successful takeover of KLM to prove their ability to work in different geographical areas, without any industrial disharmony.
The choice between Air France-KLM and Air One ultimately rests with the coalition government of Prime Minister Romano Prodi, who said there are divisions over the decision.
Deputy Prime Minister Francesco Rutelli said at the weekend neither offer was convincing while Transport Minister Alessandro Bianchi said on Monday both needed study.
Financial details are secondary to a decision which must cater to combative unions and regional interests that want to keep Milan's Malpensa as a hub -- threatened by the plans of Alitalia itself and the Franco-Dutch carrier.
The domestic challenger Air One, which has put forward a bid of one euro cent per share for Alitalia, said it would offer people accepting its bid a 3 percent stake in the new group and was ready to give stakes to one or more international players.
AP Holding, which controls Air One, said in a statement it would immediately pump at least 1 billion euros ($1.43 billion) into the state controlled airline through a capital increase and would buy all Alitalia bonds held by the Treasury.
The price of 0.01 euro per share "will allow the resources invested to be entirely used to relaunch the company," it said.
Global giant Air France-KLM's plans include a cash injection of at least 750 million euros.
Alitalia's shares, battered on Friday on news the highest offer was only 0.35 euros per share, recovered after steep early losses on Monday and were down 3.74 percent at 0.7290.
That gives the airline, which carries some 1.2 billion euros of debt, a market value of around 1.01 billion euros -- down from about 1.35 billion euros when the government first put it up for sale a year ago.
Alitalia's main attraction is its dominance of the business route from the financial capital of Milan to Rome, where Air One is its only major competitor.
Its attractiveness for Air France-KLM may have increased as rival Lufthansa gets closer to buying Spain's Iberia.
Air France-KLM, a long-time commercial partner of Alitalia, emerged as a bidder for the airline earlier this month after snubbing year-long attempts by the Italian government to find a buyer for its 49.9 percent stake.
Prodi will meet French president Nicolas Sarkozy on Thursday along with Spanish Prime Minister Jose Luis Zapatero.
Offers on the Table
The Franco-Dutch airline said in a statement on Monday it had made a non-binding share exchange offer and that it would buy all Alitalia's convertible bonds.
It gave no details of the share-exchange ratio, the assumed value of Alitalia or timing of the planned offer.
Shares in Air France-KLM were down broadly in line with its European peers, losing around 4.15 percent at 23.08 euros which gives it a market capitalization of about 6.93 billion euros.
Air France-KLM would immediately inject at least 750 million euros into Alitalia through a capital increase open to all shareholders and fully underwritten by Air France-KLM.
That could allow Rome, which is banned by the European Commission from giving any more money to the loss-making airline, to take a minority stake in the new group.
Air France-KLM added that there would be no further redundancies over those already planned by Alitalia, which could mean up to 1,700 job losses.
Air France-KLM would renew all Alitalia's Boeing MD80 short/medium-haul fleet and the B767 long-haul fleet.
Air One plans to buy 130 Airbus aircraft to renew Alitalia's fleet.
Its head Carlo Toto, whose bid is backed by Italy's largest retail bank and one of its corporate saviours, Intesa Sanpaolo, said he would be willing to cede around 20 percent of the future company's Rome to Milan slots to meet antitrust regulations.
Air One, whose total annual revenues hardly match Alitalia's losses, needs to show it can finance its bid. Although it has a commercial deal with Lufthansa, it has not yet flaunted the clout of such an international partner in its actual bid.
But Intesa Sanpaolo's chief executive Corrado Passera said it would be wrong for Air One to make alliances "cap in hand" to complete the deal. He added the company would remain listed.
M&A activity in the airline sector is set to continue unabated, despite the financial markets turmoil, some analysts say.
"There's some more to come, we have the open issue of Iberia," Strickland told CNBC.com.
Last month a consortium led by U.S. private-equity firm TPG withdrew its bid for the Spanish carrier, citing difficulties raising the funds.
*Reuters contributed to this report.