The board of Alitalia, Italy's loss-making, debt-laden and partly state-owned airline, has agreed to a €138 million (£106 million) takeover offer from Air France-KLM, one of the world's biggest carriers.

The agreement was smaller than expected. Barring any last-minute obstacles and subject to government and union approval, it should end a 13-month saga in which numerous attempts to find a viable buyer for the airline had come to nothing.

Interested buyers had included Aeroflot and Lufthansa, as well as European and American consortiums.

Attempts to sell the national carrier caused a dispute within the Italian Government, with the radical Left opposed to foreign buyers and to the inevitable loss of jobs.

At the same time, there has been growing public resentment and impatience over the €4.3 billion of taxpayers' money thrown at the airline merely to keep it airborne.

At the end of a 14-hour meeting, the Alitalia board decided to accept the Air France-KLM offer of a 1-160 share swap for both the 49.9 per cent of Alitalia held by the Italian Treasury and the 50.1 per cent on the open market. Alitalia bonds will be taken over at their market price of €0.3145 on Friday.

The turnaround plan will mean that about 1,600 of Alitalia's 19,000-odd employees will lose their jobs.

In addition, the number of flights will be cut back, specifically those running at a loss, and the total number of passengers carried over the next three years reduced in an effort to make the company profitable. The owners are expected then to buy a new generation of aircraft. Alitalia will continue to fly in its own livery and will remain, at least nominally, Italy's national airline, appeasing nationalist sentiment.

The conditions set by Air France-KLM require ratification by the Italian Government, which is expected early this week, agreement by the 19 trade unions that represent Alitalia's employees and the go-ahead from Consob, Italy's corporate watchdog, and European authorities.

Through the share-swap, the Italian Treasury will have 1.4 per cent of Air France-KLM-Alitalia and, by agreement, the right to place one person on the group's board of directors for the next six years. The takeover is expected to be completed in May or June.

Alitalia is hovering on the brink of bankruptcy, with debts of €1.28 billion and only about €282 million in available cash. It does not have enough to keep the company running until June.

The Italian Treasury is expected to step in to help the airline and guarantee an immediate €250 million loan.

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