Air France-KLM has confirmed its selection as Italian flag-carrier Alitalia's strategic partner, and will take a 25% share in the airline through a €323 million ($431 million) agreement.

Selection of Air France-KLM comes nine months after the collapse of negotiations between the two which had been aimed at saving Alitalia in its previous form.

The breakdown of those discussions started Alitalia's slide towards administration and the emergence of a new, stripped-down carrier following the purchase of Alitalia assets by investor group Compagnia Aerea Italiana.

Air France-KLM will underwrite a reserved capital increase of €323 million and have three of the 19 seats on Alitalia's board.

A four-year lock-up period means no Italian shareholders will be able to transfer shares externally to Air France-KLM or the Alitalia shareholder group until January 2013. This lock-up will be followed by a period of further share-trade restrictions until October 2013.

In a statement, Air France-KLM says Alitalia expects to generate €720 million in synergy savings - mainly from network optimisation and revenue management - over the next three years.

The partnership will be based on a multiple-hub strategy, it adds, with Rome Fiumicino and Milan Malpensa being added "on an equal basis" to the hubs at Paris Charles de Gaulle and Amsterdam Schiphol.

Air France-KLM will also have two seats on the nine-member executive committee of Alitalia. Chairman Jean-Cyril Spinetta says: "In view of the many challenges facing our sector, co-operation is more than ever a necessity and we have now made a further step towards this.

"We are very happy with this extended partnership with the new Alitalia. It represents a genuine growth opportunity for our two airlines and our agreement is in the interests of our shareholders, our customers and our staff."

The agreement is subject to Alitalia shareholder approval and clearance by competition regulators. Competition clearance, says Air France-KLM, could come during the first quarter - at which point the agreement will take effect.

"This is a highly innovative and ambitious alliance with important industrial implications," says Alitalia chairman Roberto Colaninno.

"It has been built around Alitalia's strong potential for growth over the coming years and on the quality of the Italian shareholders' entrepreneurial project."

Source: Air Transport Intelligence news