(Adds CAI statement, details)
By Deepa Babington and Giselda Vagnoni
ROME Nov 19 The Italian government has agreed to sell Alitalia's assets to a group of Italian businessmen at a sweetened price, paving the way for the relaunch of the bankrupt carrier in private hands after a two-year hunt for a buyer.
Alitalia's best assets will be sold to the CAI consortium for 1.052 billion euros ($1.33 billion) including debt, in line with independent estimates of their worth and slightly higher than the group's 1 billion euro initial offer, the government said on Wednesday.
The near conclusion of the deal after Alitalia's tumultuous search for a buyer that included a failed auction and a failed takeover by Air France-KLM is a feather in the cap for Prime Minister Silvio Berlusconi, who had promised to save Alitalia.
The airline filed for bankruptcy in August, weighed down by high labour costs, strikes, surging oil and political meddling.
With no other bidders in the fray and Alitalia's cash likely to run out this month, CAI's takeover was never in any danger of being rejected, but there was speculation it could be asked to modify its offer, delaying the airline's restructuring.
CAI -- or Compagnia Aerea Italiana -- had initially bid 275 million euros ($347.2 million) for Alitalia's flight operations and 100 million euros in a mix of cash and debt for other units, and would take on further debt of 625 million euros.
The government did not specify how the 1.052 billion euro offer would be split between cash and debt.
With approval from the European Commission for the deal already in the bag, the takeover now awaits only a formal signoff by the administrator overseeing Alitalia's bankruptcy. He has already said he will do so after government approval.
CAI Chairman Roberto Colaninno in a statement said the group was satisfied with the progress of their offer.
CAI must now sign a separate agreement to buy assets of smaller rival Air One, which will be combined with those of Alitalia in a bid to relaunch Italy's national carrier.
The group still faces opposition to the deal from Alitalia's pilot and cabin crew unions that reject new labour contracts under the takeover, but is trying to dismiss that threat by approaching workers directly to offer them jobs.
Protesting workers have cancelled hundreds of flights over the past 10 days and Fantozzi has said Alitalia will have to cancel 100 flights a day through the end of November.
A reshaped Alitalia with fewer staff and fewer routes is expected to be launched next month. CAI is also expected to pick either Air France-KLM (AIRF.PA) or Lufthansa (LHAG.DE) as a foreign partner to give Alitalia operational backing and buy a 20 percent stake in the relaunched airline.
Italian media have said the French airline is likely to edge out its German rival, but sources close to CAI have cautioned that no decision has been made so far and talks continue.
(Editing by Elaine Hardcastle and Hans Peters)