Air France-KLM said that it would invest at least €750 million (£535 million) into Alitalia as it stepped up its campaign to win over the Italian Government and upstage Air One, the only rival bidder for the struggling Italian flag carrier.

The Franco-Dutch airline said that it would acquire the Alitialia group via a share swap and purchase of all of Alitalia's convertible bonds.

The cash injection would be in the form of a capital increase and would be used to support a relaunch of the airline with new cabin configurations and ground services.

Alitalia would remain a "strong national lfag carrier with world coverage" said Air France-KLM.

It would "restore Alitalia's international image as a major airline".

Details of the Air France-KLM offer emerged after Saturday's statement from Air One in which the independent Italian carrier said it had firm offers for 90 new Airbus A320 aircraft that would replace 77 ageing MD82 aircraft used by Alitalia on its domestic and European routes.

It would also acquire 20 long-haul aircraft and would make Alitalia Europe's fourth-largest carrier.

The Franco-Dutch bidder said that fleet renewal was a top priority and indicated that the recovery of relaunch of Alitalia would not add any more redundancies to the existing programme of layoffs.

The rival claims from Air France-KLM and Air One emerge before tomorrow's board meeting at Alitalia, where the company is expected to choose its rescue partner.

he Franco-Dutch group's promise of cash represents a late attempt to derail the political support for Air One, which benefits from its promise of an Italian solution to the Alitalia problem.

AP Holding, a company controlled by Carlo Toto, the Italian entrepreneur, and which is the parent of Air One, secured the support last week of Luca Cordero di Montezemolo, head of Cofindustria, the Italian employers confederation.

AP has promised to maintain Alitalia's twin hubs in Rome and Milan and relaunch its international operations.

However, enthusiasm for a domestic bidder is tempered with concern that AP lacked the financial clout to support the rescue of Alitalia which has €1.2 billion in debt and is losing €1 million a day.

Alitalia's twin hub strategy is expensive and the airline has an appalling industrial relations record.

The Air One backer claims the support of four banks, including Intesa Sanpaolo, Nomura, Morgan Stanley and Goldman Sachs.

Huge redundancies are expected to follow any takeover of the company.

The Air France-KLM bid would offer Alitalia the protective umbrella of Europe's biggest airline grouping but would leave the Italian Government with the political burden of having made Italy the only large European state without a flag air carrier.

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