The Italian Government has approved Alitalia's plan to co-operate with Air France and its SkyTeam alliance. The go-ahead comes against a background of deteriorating financial performance at the Italian flag carrier.

Approval of the plan, submitted by Alitalia chief executive Francesco Mengozzi, clears the way for the airline to sign a Memorandum of Understanding with Air France and SkyTeam partners led by Delta Air Lines in the next few days, leading to a full agreement by the end of the month and the official launch of the alliance tie-up by late October.

The recently elected Italian Government has accepted Mengozzi's view that Air France offered the only viable option. Earlier chances of a deal with KLM or Swissair have evaporated.

While it appears to have resolved its alliance problems, Alitalia faces continuing financial question marks. Hopes of a revival this year have been put on hold and the airlines now expects an operating loss of at least L500 billion ($220 million), slightly more than in 2000.

Alitalia needs funds to carry out a planned fleet update and is going to require a huge recapitalisation to avoid being blocked by European Commissions state aid limitations.

Source: Flight International