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Air France-KLM Offers Concessions in Alitalia Talks

Air France-KLM offered to continue talks with unions on its deal to buy Alitalia beyond a March 31 deadline and promised a new plan on job cuts, a union official said, signaling its first concessions in talks so far.

** FILE ** An Alitalia Boeing 777 is parked at Leonardo da Vinci International Airport in Rome, in this Aug. 27, 2002 file photo. The European Union is likely to approve Italy's plan to bail out state-controlled airline Alitalia with a euros 400 million (US$488 million) bridge loan, EU Transport Commissioner Loyola de Palacio told reporters Tuesday, July 13, 2004 after meeting with Italian ministers. (AP Photo/Massimo Sambucetti/FILE)
Massimo Sambucetti
** FILE ** An Alitalia Boeing 777 is parked at Leonardo da Vinci International Airport in Rome, in this Aug. 27, 2002 file photo. The European Union is likely to approve Italy's plan to bail out state-controlled airline Alitalia with a euros 400 million (US$488 million) bridge loan, EU Transport Commissioner Loyola de Palacio told reporters Tuesday, July 13, 2004 after meeting with Italian ministers. (AP Photo/Massimo Sambucetti/FILE)

But Alitalia's chairman told unions the Italian government is opposed to prolonging the deadline, a union source said, leaving the fate on any extension of talks unclear.

Air France-KLM's new proposal will arrive on Friday and outline measures to avoid "leaving anyone by the wayside", sources close to the Franco-Dutch carrier said, as CEO Jean-Cyril Spinetta met unions in Rome to seek their blessing for the takeover.

Spinetta had so far refused to extend the deadline, which was set as the date by which all obstacles to the takeover -- including union opposition -- must be resolved.

He has also said there is little room for changes to the deal, which has become a growing campaign issue ahead of Italy's April 13-14 elections.

Union sources earlier quoted Alitalia's chairman as saying extending talks would be possible only if the two sides first agreed on job cuts and the future for its ground services and cargo units.

Two Alitalia unions, however, said they were unsatisfied by Air France-KLM's concessions so far.

"There has only been a timid opening," said Massimo Notaro, leader of one of the unions representing pilots.

Air France-KLM has outlined plans to cut 2,100 jobs and take on less than half of the workers at Alitalia's troubled ground services unit AZ Servizi. That has angered Alitalia's unions, who want the number of job losses to be reduced by 40 percent.

Shares Suspended

The talks with unions came as speculation of a better offer from Air France-KLM, or of a possible rival bid for Alitalia, sent shares in the sickly airline so high they were briefly suspended. They closed up 33 percent to 0.4615 euros on Tuesday.

Air France-KLM would pay about two days' worth of revenues for Alitalia in its share swap offer, which also promises a bond buyback and a 1 billion euro capital increase for the airline, which loses over 1 million euros a day.

On the campaign trail, opposition leader and current poll favorite Silvio Berlusconi has raised the possibility of an Italian bid to rival that of Air France-KLM.

The outspoken media billionaire has already said he would veto the Air France-KLM takeover if he becomes prime minister and even suggested his children might join a rival bid.

Apart from getting unions and Italy's next government on board with its deal, the Franco-Dutch carrier also wants to be protected from a $2 billion lawsuit against Alitalia over flight cuts at Malpensa airport near Milan.

Outgoing Prime Minister Romano Prodi said on Monday that an Italian offer would be desirable but so far no serious bid had been made to counter that of Air France-KLM, which was approved by his centre-left government earlier this month.

Centre-left leader Walter Veltroni, who will face Berlusconi at the ballot box, said Air France-KLM was the only option.

"Alitalia needs a solution for its structural problems and in the current state of play that solution is called Air France," Veltroni said.

Domestic airline Air One is ready to make another bid, its head Carlo Toto said on Saturday, but wants to look at financial details. Intesa Sanpaolo bank, which sponsored Toto's initial offer, has said there is nothing on the table.

Italian newspapers speculated at the weekend that support for a local offer could come from a variety of families and companies but none has confirmed interest yet.

The head of Italy's bourse regulator Consob ruled out a more permanent halt to trading in Alitalia's shares on Tuesday and called on politicians to stick to facts in increasingly heated electioneering over Alitalia's future.

Economy Minister Tommaso Padoa-Schioppa, who is overseeing the sale of the state's 49.9 percent in the carrier, said at the weekend any new offer would have to be made within days rather than weeks because of the airline's precarious financial situation.

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