Air France-KLM said Thursday it would join the Italian consortium set to revive Alitalia if it sees a realistic prospect of a return to profit.
''Air France believes in the Italian government,'' said Transport Minister Altero Matteoli, adding that German airline Lufthansa was also interested.
''It will be up to Alitalia to choose Air France or (Lufthansa),'' he said.
Air France made its announcement shortly after tailor-made changes to Italy's bankruptcy laws paved the way for the rescue operation to be launched Friday.
The Franco-Dutch giant, which walked away from a contested takeover deal in April, saw its shares rise by some 3% following the announcement.
Earlier on Thursday, the cabinet approved measures making it easier to liquidate Alitalia so a new company, dubbed Compagnia Aerea Italiana (AEC), could rise from its ashes.
The changes to Italy's 2004 bankruptcy law will allow Alitalia's government-appointed commissioner, former finance minister Augusto Fantozzi, to sell assets immediately.
The existing law, crafted in the wake of the Parmalat collapse, allowed the failed dairy giant to stay in business and gradually work its way back from the brink of financial ruin.
Analysts say Alitalia must be turned around more quickly.
The sale to a new consortium would take place at market prices, the government said.
Investors, who have seen their shares tumble over the last few years, would receive compensation from a special fund set up in 2006.
Alitalia is set to be split Friday into a new company with viable parts and a bad company which will take on its liabilities and be put into receivership.
The new company, to be led by financier Roberto Colaninno, will see 16 investors among Italy's top industrial and financial groups putting in some one billion euros to create what has been called a national champion after a merger with Italy's top private airline Air One.
The new Alitalia, which reported operating losses of 800 million euros this year, would cut them to about 250 next year and return to profit in 2011, according to the Italian press.
The company will have fewer flights and planes but may rebuild operations - focusing more on Milan's Malpensa airport than its current hub at Rome Fiumicino - in the event of the strategic alliance with Air France.
The operation will involve some 7,000 lay-offs which the government has promised to ease by giving all Alitalia workers wage-replacement subsidies for seven years.
Most of the workers will find new jobs in the private sector, the government said.
'VICTORY' FOR BERLUSCONI.
The government has hailed the rescue plan as a victory for Premier Silvio Berlusconi, who has insisted amid skepticism that he could find enough interested investors, but the opposition is worried that taxpayers and small investors will carry the can.
The government has assured critics it will safeguard investors and is confident the so-called Phoenix plan will not be contested by the European Union for breaking competition rules.
Italy's anti-trust authority will not be required to vet the plan, the government said.
The opposition has criticised the cost of the operation, saying the bill will be footed by taxpayers.
It has also slammed the scale of the lay-offs which it says are far fewer than the 2,000 or so contained in the Air France takeover rejected by unions during the spring general election.
The government is set to meet unions, which are already raising objections to the plan, in Rome on Monday.
As soon as the plan was unveiled, Rome Mayor Gianni Alemanno called for an urgent meeting to defend Fiumicino from a sharp cut in business.
Alemanno, a member of rightwing government party National Alliance, urged the government to call an ''immediate'' meeting with local bodies to assess the impact of the Alitalia plan.
The governor of Lazio, Piero Marazzo, also called for an assessment of the ''serious consequences for Rome and the whole region''.
The plan aims to ''go beyond the hub concept,'' cutting Fiumicino's routes to 44 and raising Malpensa's to 73, according to media reports.
Many of Fiumicino's jobs appear set to be placed into the bad company.
The strengthening of long-neglected Malpensa over Fiumicino has long been a prime concern of the Northern League, a key partner in Silvio Berlusconi's centre-right government.
League leader Umberto Bossi emerged from the cabinet meeting saying the plan was ''OK''.
Centre-left leader Walter Veltroni called the plan ''confused'' and claimed Alitalia would turn from a flag-carrier into ''the bearer of a little flag''.
Alessandro Profumo of the Unicredit bank said that the plan appeared to shrink Alitalia ''considerably''.
''All that really bothers me is that up until recently I had a direct flight to Warsaw and the plan means I still won't have one,'' he said.
The plan faces an immediate legal challenge from a consumer group in court Friday morning.
''This carve-up will slash share value,'' Codacons said.
The Alitalia consortium includes Colaninno, the Benetton clothing and financing group, financier Marco Tronchetti Provera, the Ligresti and Caltagirone construction and finance groups, and the Riva and Marcegaglia steelmakers, as well as Air One.
Financier Colaninno, the man who engineered Italy's biggest private takeover in 1999, of telecommunications giant Telecom Italia, is expected to be installed as president of the new company on Friday with his right-hand man Rocco Sabelli as CEO.
