Air France and KLM are still hoping to clinch a planned tie-up, days after an expected breakthrough was scuppered by last-minute Dutch objections and Italian attempts to shoe-horn Alitalia into the deal.
The French and Dutch airlines had said on Wednesday that their talks had entered an "advanced stage," but Air France canceled a board meeting later the same day at which observers had expected an agreement to be unveiled.
The hitch came amid growing pressure from Italy for its state-owned airline Alitalia to be included as part of a three-way consolidation.
But more light was shed on the hiccup on Friday, when Dutch Prime Minister Jan Peter Balkenende said he wanted guarantees on the future of Amsterdam's Schipol airport, KLM's current hub, as part of any deal.
"Schipol is a fantastic airport with an international reputation and must remain so," Balkenende told Dutch news agency ANP.
"We are asking for the greatest attention to be paid to its future."
Balkenende was speaking after the Dutch daily De Telegraaf newspaper reported that it was his government's intervention that had halted the deal.
Italian pressures came to a head on Tuesday, when Prime Minister Silvio Berlusconi told his French counterpart Jean-Pierre Raffarin that he backed a closer alliance between Alitalia and Air France.
The next day, Alitalia cancelled its own board meeting as chief executive Francesco Mengozzi lunched with Air France chairman Jean-Cyril Spinetta at Raffarin's official residence.
On Friday, however, Spinetta reportedly told a company works council that it was too early to consider bringing Alitalia into any partnership with KLM.
"He said that this will come later, after a while, that it is not the right time now," said Yvon Touil, head of the CGT union at Air France.
The latest comments attributed to the Air France chairman cast his meeting with Mengozzi in a different light, suggesting its timing may have been driven less by urgent business with Alitalia than by a desire to discourage Dutch foot-dragging.
The Hague insists it is keen on consolidation with Air France in principle, but observers say Schipol could become a sticking point if its status as a major European hub is threatened under a deal that would divert traffic to Paris -- as some Dutch ministers fear.
"The role of Schipol has always been an important point for us," KLM spokesman Bart Koster acknowledged in an interview with AFP, adding that the airline was in direct and regular contact with the government on the issue.
Schipol's development into one of Europe's busiest flight routes has been largely powered by KLM, in which the government still holds a 14 percent stake.
An estimated 120,000 local jobs now depend on the airport, and a major upgrade is already underway to increase capacity to 600,000 flights a year by 2010.
A full merger or takeover between KLM and Air France would create the world's largest airline in terms of sales.
As the Air France board meeting was canceled on Wednesday, the company said: "Critical points are still under discussion between the parties and further communication will follow as soon as an agreement is expected to be reached."
Spinetta told a works council the same day that the airlines had agreed on the "main principles" of a deal to create "one group with two companies," according to Francois Cabrera, head of the CFDT union at Air France.
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