The cabinet Monday evening will examine an offer from Air France-KLM for the Treasury's controlling stake in Alitalia but the fate of the national carrier appears to be in unions' hands.
Air France-KLM presented its offer at the weekend but with a number of conditions attached, including one that unions approve the takeover by March 31.
Unions have complained over the 'take it or leave it' nature of the offer and the head of Italy's biggest trade union CGIL, Guglielmo Epifani, has repeatedly said that the offer ''must be open to negotiation''.
''If there is no margin for negotiation, there will be inevitable consequences because we are strong enough to assume our own responsibilities ,'' he added.
The Air-France-KLM offer envisions job cuts of some 1,600 employees.
Unions are also concerned over the fate of Alitalia's ground and maintenance activities run buy AZ Servizi, a company in which the state holding company Fintecna holds a 49% stake. Air France-KLM has said it only intends to acquire a minor interest in AZ Servizi, thus guaranteeing jobs for only 25% of its work force.
Air France-KLM Chairman Jean Cyril Spinetta, together with Alitalia CEO Maurizio Prato, is set to meet with unions on Tuesday to illustrate the takeover offer.
Another condition which has complicated the operation was Air France-KLM's demand that the Treasury assume financial responsibility for a 1.25-billion-euro suit filed against Alitalia by the company which manages Malpensa airport, SEA, over the carrier's decision to drastically cut back service at the Milan airport.
According to SEA, by downsizing Malpensa's role Alitalia had violated a 2002 partnership agreement between the two to make the Milan airport Italy's second hub after Rome. The Air France-KLM offer was approved by the Alitalia board Saturday night and it is currently being examined by the Treasury ahead of Monday evening's cabinet meeting.
The final draft of the Air France-KLM offer was below previous expectations, especially in regard to the value given to Alitalia shares in view of a share-swap operation: 10 euro cents instead of a previous calculation of over 30 cents.
This sent Alitalia shares into a tailspin on Milan stock exchange on Monday where their trading had to be repeatedly suspended due to excessive losses. In its offer, Air France-KLM said it was ready to buy all Alitalia shares and convertible bonds and pump one billion euros into the airline.
Alitalia would maintain its brand, logo and status as Italy's national carrier and Rome would become the third hub for Europe's biggest carrier, after Paris and Amsterdam.
However, the plan also called for eliminating Alitalia's all-cargo activities by 2010, reducing Alitalia's fleet and trimming loss-making routes.
Alitalia has a net debt of 1.3 billion euros and pundits say the only viable alternative to the Air France-KLM offer is liquidation.
Some economists have gone so far as to suggest letting the national carrier go bankrupt, after which a new airline could be built from scratch without the weight of current labor contracts.
This was the strategy followed by national carriers Sabena of Belgium and Swissair, which after collapsing were restructured and then sold to the private sector.
However, should Italy accept the Air France-KLM offer, the Treasury would retain an investment in Europe's biggest airline and have a representative on the carrier's board.
