Air France-KLM formally withdrew its bid for Alitalia late last night, sharply reducing the chances that Europe's biggest airline can be persuaded to buy the Italian flag carrier.
The Franco-Dutch carrier said in a brief statement that Alitalia had asked it to clarify its position after it quit talks with unions over conditions for the takeover that had already been agreed in principle with management.
"Air France-KLM has indicated to Alitalia that the contractual arrangements announced on 14th March with a view to launching a public exchange offer on Alitalia were no longer valid; the conditions precedent that had to be satisfied prior to launching were not fulfilled," it said in a statement in English, French and Italian.
It was not immediately clear if Air France-KLM would consider making a fresh bid, and no further comments were available.
The conditions Air France-KLM had set included getting approval of unions and of a new Italian government. The state owns 49.9 per cent of Alitalia.
Silvio Berlusconi, who will become prime minister next month after winning an April 13th-14th general election, had said he would not accept the Air France bid in its current form and that he hoped a consortium of Italian investors would come forward
instead.
A spokesman for Italy's caretaker prime minister Romano Prodi said he would call a cabinet meeting in the next 48 hours.
The outgoing centre-left administration was talking with Berlusconi's centre-right team to seek a future for Alitalia, he added.
Earlier in the day sources had told Reuters that the cabinet was likely to meet today to discuss a bridge loan to keep Alitalia flying while it waits for its fate to be settled.
Air France-KLM had asked the government to extend a €300 million credit line to Alitalia to allow it to continue operations. Analysts say it has weeks or a few months at most before it runs out of cash.
The European Union, which has forbidden further state aid to the airline, last week said that it saw no grounds for more aid to the carrier and that any loan must be based on commercial terms.