Alitalia has agreed to be bought by Air France-KLM, the world's biggest airline by revenues, in a deal valuing the near-bankrupt airline's equity at just 138 million euros -- far less than expected.

The sale of the loss-making airline is a hot issue ahead of Italy's general election on April 13-14 and Air France-KLM has stipulated it wants approval from the next government as well as from Alitalia's labour unions.

Opposition leader Silvio Berlusconi, who is currently ahead in opinion polls, criticised the sale to Alitalia's long-time partner and European neighbour, saying he favours an Italian solution.

The takeover would end the 60-year independence of a global Italian brand but would also avoid the flagship airline going broke as its cash reserves quickly dry up and the European Union has banned any more state aid.

The airlines said Air France-KLM had offered one share for every 160 shares of Alitalia as part of its binding offer, valuing Alitalia's stock at 0.10 euros a share -- an 81 percent discount to the record low price seen at Friday's close.

That price is well short of the 0.35 euros per share value which Air France-KLM was reported to have initially bid and comes closer to the 1 cent per share offer from domestic player Air One, which lacked the deep pockets of its rival and was snubbed by Rome.

Air France-KLM also offered to pay 608 million euros to buy back Alitalia bonds and pledged to underwrite a 1 billion euro cash call to shareholders as part of a commercial overhaul.

It set a deadline of March 31 for several conditions on its offer, including agreement with airports operator SEA over a 1.25 billion euros claim for damages for cutting slots at Milan's Malpensa airport in half to 170.

The 138 million euro price for Alitalia stock is equivalent to roughly two days' of revenues at Franco-Dutch airline group Air France-KLM.

"This will give Alitalia the means to restart its development, and in consequence, consolidate its position as the national leader," Air France-KLM, itself founded from a merger of French and Dutch flag carriers in 2004, said in a statement on Sunday.

"Its membership of the Air France-KLM Group together with the implementation of the (industrial) plan should enable Alitalia to return to operating profit as early as 2009, and to rapidly move to operating margin levels in line with those of other major European airline companies."         

Alitalia has been on the block for more than a year as the Italian government unsucessfully hunted for a buyer for its 49.9 percent stake in the carrier. Rome will discuss the sale this week.

The airline bowed to the terms of the offer after a marathon board meeting that started on Saturday morning and continued into the early hours of Sunday.

Only some of the operations of Alitalia's troubled ground services unit, AZ Servizi, will be folded into that of the parent carrier being bought -- signalling overall job losses could be higher than the 1,700 expected.

Alitalia's unions had feared Air France-KLM would decide against taking on most of AZ Servizi, which is run separately, sparking steep job cuts among its less than 8,000 workers.

On Saturday the leader of the Fit-Cisl union Raffaele Bonnani accused Air France-KLM of taking unions for a ride, knowing full well they were "stumbling in the dark blindfolded".

Just under half of the 8.7 million shares to be issued by Air France-KLM will go to the Rome government, implying an Italian government stake of 1.4 percent in Air France-KLM -- lower than a 3 percent previously reported.

Italy's government is expected to extend a credit line to Alitalia to allow the carrier to continue operations while the deal is completed and the capital hike carried out. Alitalia has warned it needs a fresh cash infusion by mid-year to keep flying. It h