Despite a court ruling clearing the way for Air France-KLM to make a formal bid for Alitalia, the merger remains up in the air because of conditions the French-Dutch carrier is expected to impose and the position of Italy's next government.
Air France-KLM is set to present its bid on Friday and according to the French press it will make clear that the offer will only be valid if it has the approval of Italian unions.
Aside from unions' approval, Air France-KLM has already said its offer will depend on a green light from the new Italian government to be formed after next month's elections.
Speaking on Wednesday, Transport Minister Alessandro Bianchi observed that ''it will take quite a while to work out these conditions, if they can be worked out at all''.
However, the minister added that it was ''very reasonable'' to seek the next government's approval.
Observers believe that winning union support will be difficult because of what the French press has described as ''drastic changes'' made to the offer outlined to unions last December. According to the French press, Air France-KLM will offer less than the 35 euro cents it was expected pay for Alitalia stock in a share-swap operation, acquire a smaller stake in Alitalia's ground services than originally thought and present a business plan which will include greater job cuts that initially envisioned.
Unions have complained from the start that they have been left out of merger negotiations between the two airlines and now find it ''unpleasant'' that they find themselves in a ''take it or leave it'' situation.
UIL union leader Luigi Angeletti observed that hinging the deal on unions' approval was ''a way to avoid political responsibility (of a possible failure) and force unions to make the unpleasant decisions''.
On the political front, the merger is threatened by polls predicting a victory by the center-right coalition of former premier Silvio Berlusconi, which has never been in favor of Air France-KLM taking over Alitalia.
This because of the strong opposition of the regionalist Northern League, a key center-right coalition partner, to downsizing the role of Milan's Malpensa airport as established in Alitalia's current rescue plan and adopted in in Air France-KLM's offer.
Rather than save Alitalia by selling it, as the outgoing center-left government has tried to do, a key Berlusconi economic advisor has suggested that the national carrier should first be allowed to go bankrupt, after which a new airline could be built from scratch without the weight of current labor contracts.
''I am in favor of a piloted bankruptcy which would also play in Malpensa's favor. We could then level everything, including contracts, and start anew,'' Renato Brunetta said.
The strategy indicated by Brunetta was the same followed by national carriers Sabena of Belgium and Swissair, which after collapsing were restructured and then sold to the private sector.
Speaking on Wednesday, a leading member of the Northern League, Roberto Calderoli, said ''perhaps the best thing to do would be to pull the plug on Alitalia, let it die and then start again as the Swiss did''.
COUNCIL OF STATE HANDS AIR ONE SECOND DEFEAT.
While union and political complication may cloud the merger skies, the Council of State on Tuesday cleared the way for Air France-KLM to present its bid by rejecting an attempt by Air One's parent company AP holding to suspend exclusive negotiations between Alitalia and Air France-KLM for the Treasury's controlling stake in the national carrier.
This was Air One's second defeat after losing a similar battle in the TAR regional administrative court.
In its ruling, the Council of State pointed out how Air One had accepted the terms Alitalia has set in seeking a potential buyer with which to enter exclusive negotiations.
Last December Alitalia's board unanimously chose Air France-KLM over Air One, the two remaining bidders, because it said it offered the best guarantees for the national carrier's future.
The Italian government decided at the end of 2006 to sell most if not all of the Treasury's 49.9% stake in Alitalia.
After an attempt to auction the stake failed last summer, it was decided that Alitalia management would negotiate the direct sale of the Treasury's stake, with the government having the final word on the deal.
