Unions Clear Way for Alitalia Relaunch

The last of Alitalia's nine trades unions yesterday gave grudging endorsement to the plans of the airline's prospective buyers, clearing the way for a reshaped Italian flag-carrier to be launched, possibly on November 1.

Two unions representing flight attendants signed a deal after a breakthrough in talks with pilots' representatives. The main task now facing the investors poised to take over the company is to choose a foreign minority partner from between Air France-KLM and Lufthansa. The German airline, backed by the prime minister, Silvio Berlusconi, is emerging as favorite.

The agreement with the flight attendants' representatives brought to a close more than a month of negotiation, walk-outs, demonstrations and frantic government mediation that saw the airline taken to within an ace of being grounded. Indeed, it remains a mystery how the company, whose cash reserves were due to be exhausted this week, has managed to keep flying.

The outcome represented a victory for Berlusconi's determination to keep the airline in Italian hands at all costs. But the bill for the taxpayer will be a hefty one, at least €2bn (£1.6bn) by most estimates.

Antonio Divietri, the head of one of five smaller unions whose intransigence almost scotched an agreement, left the prime minister's office yesterday saying: "We've signed. But there's nothing to celebrate. One in three [of the flight attendants] will [lose their jobs]. And hundreds and hundreds of our colleagues will be forced to move cities to work."

Berlusconi said the talks had "run up against - let's call them - privileges that have crystallized in the course of many years". To secure an agreement, the government offered a remarkable degree of support to those who lost their jobs, including paying 80% of their salary for up to seven years.

The new Alitalia, stripped of at least €1.2bn of debt, will be created by merging the airline's potentially more profitable units with its main domestic rival, Air One. The amalgamated, but smaller, airline will strive to compete largely on short and medium-haul routes.

Air France-KLM tried to buy Alitalia this year but was blocked by a combination of Berlusconi's objections and the unions' demands for better terms. It is believed to be interested in taking a stake of up to 25% in the so far all-Italian consortium assembled by the prime minister and his advisers.

But the Franco-Dutch group is handicapped by the fact that it would seek to use Rome's Fiumicino airport as a hub. Berlusconi, a Milanese whose government's survival depends on the regionalist Northern League, has said he favors Lufthansa.

The Germans won backing at the weekend from Raffaele Bonanni, the leader of the CISL trade union federation. He said Lufthansa had "a multi-hub system that works well with our need to favor two Italian hubs, Milan and Rome".

Another union leader said the plans he had seen lent towards Milan.