Air France-KLM will go ahead with a planned takeover of Alitalia only if the move is backed by Italy's new government.
The Italian government controls Alitalia with a 49.9 percent stake.
The move represents yet another delay in the Alitalia sales process, which the government has been trying to complete for more than a year, as the beleaguered airline continues to bleed cash.
The Rome-based airline had a 2007 pre-tax loss of US$531.43 million as high costs, strikes and fierce competition from budget airlines continued to weigh. In 2006, the pre-tax loss was $883.29 million, including a $287.67 million write-down of Alitalia's fleet.
Since a new Italian government won't be in place until mid-May, a final decision on Alitalia's fate is unlikely for at least another three months.
The outgoing centre-left government of Prime Minister Romano Prodi is in favour of a sale to Air France-KLM. Prodi said earlier this month he would do "everything possible" to close the sale of Alitalia with Air France-KLM. But he heads a lame-duck government, which will resign after general elections are held April 13-14.
Moreover, several politicians in the centre-right, which leads in opinion polls, have said they want to keep Alitalia in domestic hands.
Complicating matters further for Alitalia, small Italian carrier Air One last month filed a lawsuit against the Prodi government's decision to pick Air France-KLM as exclusive bidder. A court is expected to rule on the issue on February 20.
Meanwhile, Air France-KLM reported higher than expected core earnings in its third quarter after boosting premium fares on longer routes, but worries over potential tie-ups dragged down its shares.
The carrier¡¯s operating profit in the three months to December 31 rose 23 percent to $454 million, boosted by a rise in average passenger spending and a slight increase in recently dormant cargo activity.
Sales grew 3.9 percent to $8.70 billion, also more than market analysts had expected.
Less widely watched net profit was below consensus forecasts, however, at $202.93 million, down 39 percent.
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