Aeroflot, the Russian airline, has pulled out of the bidding for Alitalia, the troubled Italian carrier, leaving MatlinPatterson, the American private equity group, and Air One, the Italian airline, as the only contenders.

MatlinPatterson, backed by Mediobanca, the Italian bank, rejoined the bidding process only last week. A consortium to which it had belonged, led by TPG, had dropped out, complaining that the Italian Government was imposing too many conditions.

The Air One bid is being made by AP Holdings, its parent company, with the Italian bank Intesa Sanpaolo. Air One, linked to Lufthansa, is Alitalia’s main domestic rival.

Russian news agencies speculated last week that Aeroflot was pulling out, although this was denied at the time.

Aeroflot, whose bid was backed by UniCredit, another Italian bank, said that it was withdrawing because it had been denied access to important details about Alitalia. “Aeroflot and its advisers have not had access to critical information about the commercial and operational aspects of Alitalia’s business to confidently formulate a well-supported business proposal to successfully restructure Alitalia,” it said. This would have “significantly limited the ability of Aeroflot to implement the necessary measures” to relaunch the Italian carrier.

Aeroflot shares rose 5.8 per cent on the news. Alitalia shares were first suspended and then fell 7 per cent. The Italian Government has asked for bids for 39.9 per cent of its stake and has extended the deadline from July 2 to July 12.

Aeroflot said that it had turned down an offer to bid jointly for Alitalia with Air One. It thanked UniCredit for its support and said that it still planned to expand in Europe by “acquiring strategic assets” – though not Alitalia.

Bidders have recoiled at the thought of inheriting Alitalia’s huge debts. Berardino Libonati, the Alitalia chief executive, said that he remained “confident of the concrete possibilities of a turnaround and development of the company”. Carlo Toto, the chairman of Air One, said that his company was seeking new partners for its bid.

Air One’s business plan for Alitalia is reported to involve 2,350 redundancies over 2008-12, including 1,600 ground staff, 300 flight attendants and 450 pilots, according to trade union officials.

Alitalia, which has been in the red since 1999 and is plagued by strikes, rising fuel prices and high labour costs, was put up for sale last December after the centre-left Government of Romano Prodi concluded that restructuring plans had not worked and that further injections of state funds were pointless.

The Government owns 49.9 per cent of Alitalia and has indicated that, although it was selling a 39.9 per cent stake, it would sell the whole lot if the right buyer emerged. The sale initially attracted 11 bidders. Alitalia posted a €3.2 billion loss in 1996-2006, including €380 million (£255 million) last year alone. The successful bidder must guarantee that Alitalia retain its “Italian identity” for at least eight years.

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