A merger between Air France-KLM and Alitalia?

Could a merger between Air France-KLM and Alitalia be on the horizon? It sounds as though it's at least a possibility, according to several reports out Tuesday (Oct. 1) .

That comes as Alitalia — which has history that is perhaps best known for a seemingly endless cycle of financial emergencies — enters a new round of turbulence that has it looking for ways to raise cash. Alitalia's deteriorating balance sheets have prompted speculation that partner Air France-KLM — which already has a 25% stake in the carrier — could come to the rescue.

As for the reports raising the possibility of a merger, one is one from Reuters. The news agency writes "Air France-KLM said on Tuesday it was open to merging with Alitalia in a move seen as the best solution for turning around the loss-making Italian airline."

Dow Jones Newswires ran a similar report, noting one key Alitalia shareholder views Air France-KLM "as a good candidate to take control of the carrier, (though) he said the ultimate decision lay with the (Italian) government."

"(Air France-KLM) is a good buyer," Gilberto Benetton is quoted by Dow Jones as saying to reporters at the Milan exchange.

However, Benetton says the Italian government would have to have a say — and that Air France-KLM would have to detail what it would do with Alitalia in a merger.

"If the government doesn't sit at the table with Air France-KLM ... the danger is that Italy as a country becomes a region," he's quoted as saying be Dow Jones. "This must be avoided at all costs."

Dow Jones writes Benetton's family, whose holdings include the eponymous retail chain, is "among a group of Italian financiers and industrialists that came to the rescue of Alitalia five years ago to stop the airline from being bought by Air France-KLM, which nevertheless owns a 25% stake."

However, Air France-KLM CEO Alexandre de Juniac indicates any move his company may make regarding Alitalia will be deliberate.

"Our conditions for helping Alitalia are very strict. If the conditions are met, I am ready to go ahead," Air France-KLM chief executive de Juniac is quoted by Reuters as saying to the French newspaper Les Echos.

He did not specify what those conditions might be.

But whether Air France-KLM considers a merger or simply tries to increase its stake in its SkyTeam partner, overcoming Italian concerns could be key.

Reuters says such concerns will likely center on whether "any Air France-KLM investment would clash with Italy's ambition to make Rome a hub for intercontinental flights, and instead turn Alitalia into a regional player and trigger job cuts."

"Air France-KLM-Alitalia, if one day we are united, could become a very great European brand," de Juniac says in comments that could help assuage such fear. " In such a scenario, we could supply (Alitalia's) long-haul flights with passengers from Air France and KLM and they could do the same for us."

"Alitalia strengthens our commercial footprint pretty much everywhere," de Juniac adds. "There are already many synergies."

Stay tuned…