Government agrees Alitalia sale

Alitalia is now looking for a foreign airline as a partner

The Italian government has agreed to sell the bankrupt airline Alitalia to a business consortium.

The move paves the way for the re-launch of the troubled carrier after a two-year hunt for a buyer.

The Italian group, Cai, is paying 1.05bn euros (£878m; $1.3bn) for Alitalia, including its debts.

The administrator overseeing Alitalia's bankruptcy must now formally approve the move, but has already said he will give this sale the go-ahead.

With no other bidders in the fray and Alitalia's cash likely to run out this month, the Cai group's takeover was never in any danger of being rejected.

Foreign partner

The airline filed for bankruptcy in August, weighed down by high labour costs, strikes, surging oil prices and political interference.

The Italian government's approval on Wednesday is the final stage in a drawn-out rescue process for the airline.

The big interest that we have seen from all potential foreign partners shows we are on the right path

Rocco Sabelli, Cai chief executive

It came a week after the European Commission told Alitalia, to repay a 300m-euro loan to the Italian government, which the Commission said amounted to illegal state aid.

While the sale still faces opposition from some trade unions at Alitalia which have rejected new labour contracts under the takeover - it is now going ahead.

Protesting workers have led to the cancellation of hundreds of flights over the past 10 days and Alitalia has said it will have to cancel 100 flights a day this month.

However, Cai's chief executive, Rocco Sabelli, said he was confident of success.

"We are working to bring this complex and delicate operation to an end and the big interest that we have seen from all potential foreign partners shows we are on the right path," he said.

Cai is expected to pick either Air France-KLM or Lufthansa as a partner for Alitalia, which is now expected to be re-launched in early December.

The conclusion of this deal - after Alitalia's search for a buyer that included a failed auction and a failed takeover by Air France-KLM - is being seen as as success for Prime Minister Silvio Berlusconi who had promised to save Alitalia.