Alitalia unions attack Air France-KLM concessions

ROME (Reuters) - Air France-KLM agreed on Friday to take on an extra 12 percent of Alitalia's ground service workers, but unions fighting its bid for the ailing Italian carrier rejected the concession as inadequate.

Air France-KLM (AIRF.PA), also battling resistance from Italian politicians and Milan's airport operator, has said it will scrap the deal without union support. The takeover is considered one of Alitalia's AZPIa.MI last hopes of averting bankruptcy.

Alitalia said after a board meeting on Friday that it was considering extending the talks beyond a March 31 deadline it and Air France-KLM had set for winning over the unions and overcoming other hurdles hampering the deal.

The airline, which loses more than one million euros a day, said in a statement that it had obtained 148 million euros ($233.3 million) of extra liquidity in view of a possible "limited" extension of the talks. The extra money is the result of tax reimbursements and the sale of Air France-KLM shares.

After an initial stalemate in negotiations with the unions, Air France-KLM unveiled plans on Friday to hire about 900 more employees of Alitalia's troubled ground services unit, according to a document seen by Reuters.

Air France-KLM would now retain 4,191 of about 7,400 employees at Alitalia's AZ Servizi ground services unit, compared with 3,300 in an earlier draft. But it is sticking to its plan to cut 500 positions at AZ Servizi and reduce Alitalia's 51 percent stake in the unit.

In a joint statement, all major Alitalia unions except one criticized the offer as changing little, but said they would not boycott talks with the two carriers on Monday.

"We're going to the negotiating table because it's our duty to seek a solution, but we want a negotiation, not a surrender," said Roberto Panella, head of the Ugl Trasporti union.

Air France-KLM confirmed plans to cut about 1,600 jobs at Alitalia's airborne operations and shut its cargo unit in 2010 -- drawing a sharp rebuke from the carrier's main pilots' union.

"There has not been any type of progress," said Anpac union chief Fabio Berti, adding the union was even ready let the airline go bust. "It is an extremely serious situation. For us pilots, the Air France-KLM plan is finished. A chapter closed."

Air France-KLM said further concessions would undermine its plans for Alitalia, which reported late on Friday that its net debt at the end of February was 1.37 billion euros, up 6.9 percent from a month earlier.

"UNACCEPTABLE"

Air France-KLM's deal is also being held up by a $2 billion lawsuit against Alitalia filed by SEA, which operates both of Milan's airports, over plans to cut flights; and the threat of a veto from Italy's next government if media magnate Silvio Berlusconi wins upcoming elections.

Berlusconi, leading in polls ahead of an April 13-14 election, has made Alitalia an issue by promising a rival Italian bid to thwart Air France-KLM's "unacceptable and even offensive" offer. Political rivals have dismissed the idea as election rhetoric.

"I don't think that this government will be able to close the negotiation by April 13. When we will be in office, we will launch an appeal to Italian businessmen and I want to see who will deny their contribution," Berlusconi said late on Friday.

Alitalia closed down 37.2 percent at 0.4020 euros after being suspended for much of the day. The shares had risen sharply recently on talk of a rival Italian bid.

But three of the Italian companies named in a newspaper on Thursday as being interested denied any involvement.

Despite Alitalia's history of losses and frequent strikes, it is attractive because of its dominance of the lucrative Milan-Rome route and offers a foothold in heavily-visited Italy.

Air France-KLM is betting it can restore the carrier -- which it is picking up for two days' worth of revenues in a share-swap offer -- to profit in two years. It will also buy back its bonds and pump in 1 billion euros in a capital increase.

(Writing by Deepa Babington and Silvia Aloisi; Editing by Richard Chang/Andre Grenon)