Air France KLM appears to be on the verge of being named a minority partner in the reorganized Alitalia, beating out Lufthansa for the right to purchase a 20%-25% stake, according to widespread press reports from Italy.

Investor group Compagnia Aerea Italia met with Italian Prime Minister Silvio Berlusconi yesterday and “explained . . . their preference for Air France and were told there were no objections from the government,” a CAI source told Reuters in Rome.

Etihad Airways could acquire Europe’s third largest low-fare airline, Air Berlin if the deal goes through.

If the deal proceeds, Etihad would be the first to accomplish a takeover across continents, after talks between British Airways and Qantas failed last week. In addition to its commercial limitations, the airlines would face regulatory hurdles such as bilateral air service agreements and subsequent traffic rights issues. It is therefore unclear if outright majority ownership of Air Berlin is feasible particularly since the airline already has a strong 31.2% foreign ownership component. Air Berlin’s biggest shareholders include U.S./Russian investor Len Blavatnik (18.94%), Hans-Joachim Knieps (9.59%) and JPMorgan Chase (4.97%). The free float is at 65.71%.

Both airlines have strong growth ambitions that have not yet paid off. Etihad, launched in late 2003 as the new national airline of Abu Dhabi, currently operates 39 widebodies. It has also placed orders for 35 Boeing 787s, 10 777s, and 55 Airbus jets, a combination of A320s, A350XWBs and A380s. In the past, Hogan said that the airline is expected to see its first profit in 2010, but that goal is getting more elusive as a result of the global recession. While Etihad does not publish detailed financials, company sources say it has posted a loss in excess of $1 billion in 2007. But, as an Abu Dhabi government-owned entity, the airline has been able to access funding for its expansion, most recently new loans for two more A340-600s. Its business model – much like Emirates’ – is geared toward connecting long-haul markets in Europe, the U.S., Asia and Africa through the Abu Dhabi hub. But unlike Emirates, Etihad is developing a more regional network with its new A320 fleet, too.

Air Berlin still expects a small profit in 2008 in spite of the high fuel prices in the first three quarters and the sour economy. But excess capacity, the complicated acquisitions of former rivals LTU and DBA, and a costly expansion on business traveler-oriented long-haul routes that was terminated earlier this year due to mounting losses, are huge impediments. Air Berlin’s financial situation has been the subject of much speculation, and if the market continues to decline as expected, its situation seems bleak. On the other hand, its network and slot holdings, as well as a long-established relationship with German tour operators, are seen as valuable assets.

British Airways and Qantas have given up an attempt to merge, leaving the British carrier free to pursue a tie-up with Iberia.

The Australian and British airlines failed to agree on the most basic term of the merger: how to share ownership of the proposed combined business.

Qantas’s market valuation is higher than British Airways, implying that the Australian company’s shareholders should have owned most of the merged company.

Their decision to walk away from the talks does not mean that they cannot try again later, especially since they already have a close relationship. They run a joint service between their two countries, and British Airways used to be a major shareholder in Qantas.

But they can just as easily look elsewhere for partners. British Airways is already negotiating to combine with Iberia, and Qantas has said several times that it needs to merge with a foreign airline.

Air France-KLM will wholly-own Dutch carrier Martinair by the end of this year after securing long-awaited clearance for the takeover from the European Commission.

KLM has held a 50% share of Martinair for several years but attempts to acquire the outstanding balance have failed to receive regulatory approval.

But the European Commission, which opened an inquiry into the renewed takeover bid in September, has finally permitted KLM to complete the acquisition.

KLM is acquiring the Martinair shareholding from AP Moller-Maersk Group. The transaction will be effective from 31 December.

“With the European Commission approval, economies of scale and synergies become available,” says KLM chief Peter Hartman. “Plans for the future of Martinair within the group will be developed in the coming period.”

Britain’s BMI is being taken over by  Lufthansa for €400m (£318m).

Lufthansa, which already owns just under 30% of BMI, has bought the 50% owned by BMI chairman Sir Michael Bishop, taking its stake to 80%. The remaining 20% of BMI is owned by Sweden-based Scandinavian Airlines, which has said it also wants to sell.

The deal will give Lufthansa the second largest share of takeoff and landing slots at London’s Heathrow airport, behind British Airways. BMI holds 11.4% of the slots at Heathrow, second only to BA’s 41.5%.