UPDATE 2-Italy court OKs exclusive Alitalia-Air France talks

(Adds Air One's plans to appeal against ruling)

ROME, Feb 28 (Reuters) - An Italian court ruled on Thursday that Alitalia (AZPIa.MI: Quote, Profile, Research, Stock Buzz) could continue its exclusive sale talks with Air France-KLM (AIRF.PA: Quote, Profile, Research, Stock Buzz), knocking down a request to stop them by rival suitor Air One, judicial sources said.

The ruling by the court in the Lazio region eliminates a threat to Air France-KLM's efforts to acquire Italy's largest airline.

Alitalia, which is losing more than 1 million euros a day, hopes to hammer out a deal with the French-Dutch carrier by mid-March. But those plans have been complicated by the collapse in January of the Italian government, which is selling its controlling stake in the airline.

The outgoing government of Prime Minister Romano Prodi picked Air France-KLM's offer over Air One's for the state's 49.9 percent stake in Alitalia in December.

But Air One, which is Alitalia's closest rival in the domestic passenger market, had refused to give up and hoped to get back into the race by presenting a new offer.

An Air One spokesman said the carrier intended to appeal the Lazio ruling to Italy's high court, but did not give any indication when this would happen.

Air One's plans for Alitalia have found favour with business and political leaders in Italy's north, a region that fears job losses and damage to the local economy from Air France-KLM's plans to reduce Alitalia's presence at its Milan hub.

Air France-KLM has acknowledged that it would need the blessing of Italy's next government, to be elected in April, before concluding any deal.