Julian Moxon/PARIS

Alitalia and KLM will sign a "master co-operation" agreement by the end of this month, almost a year after signing their original memorandum of understanding on a wide ranging commercial alliance.

The deal was conditional on the opening of Milan's new Malpensa airport hub, which is in the process of overcoming major political and operational problems following its start-up late in October.

According to Alitalia managing director Domenico Campella, the two carriers will now advance "directly to the creation of two joint companies" which will handle passengers and cargo at Malpensa. He says that any exchange of shares was "-not envisaged for the present".

Italy and the USA have also concluded an open skies deal, paving the way for Italian and US airlines to operate freely between the two countries. Final USDepartment of Transportation approval is expected early next year. The deal still faces a barrier, however, from the European Commission, which has recently started legal action against European governments forging such agreements.

Joint KLM/Alitalia activities now include codesharing on all flights between Italy and The Netherlands and, since 26 October, on services to South Africa and Australia. Cargo flights operated by the two are also codeshared. Longer term plans include the development of a multi-hub system based around Amsterdam's Schiphol Airport and Rome Fumicino and Milan Malpensa airports. The two airlines are also in talks with Air France, Continental Airlines and Northwest Airlines, exploring a major global alliance.

Alitalia is negotiating to take on 40 KLM first officers early next year to fly its Boeing 767-300ERs and MD-11s on long-haul flights to replace Alitalia pilots taking early retirement. Pilots unions have objected to the scheme, however. Alitalia's privatisation, announced by holding company IRI in May, is expected to enter its final phase by the end of this year. After eight years of losses, the carrier made a profit of L435 billion ($246 million) in 1997 against sales of L8,900 billion.

Source: Flight International