A new Italian airline called Lufthansa Italia is in the pipeline to offer direct connections from northern Italy to European destinations.

Lufthansa will today take advantage of a large traffic shortfall at one of Milan's two main airports to launch a new European service, partly filling the vacancy in the northern Italian market left by the bankruptcy and rescue of Alitalia.

The full-service airline that will fly to eight European cities next spring from Malpensa, a giant airport outside Milan was built a decade ago to be Alitalia's hub but it has been undermined by the Italian carrier's prolonged descent into bankruptcy.

"Lufthansa Italia will position us in an important market characterised by strong demand, which also holds out opportunities for buoyant growth in the future. We will be offering our Italian customers an extensive route network from northern Italy to attractive destinations in Europe" said Lufthansa CEO and Chairman Wolfgang Mayrhuber.

"Milan and Lombardy rank among Europe's economically most important and strongest regions. A good route network connecting them with Europe's principal cities is essential. Lufthansa Italia is making this a reality and at the same time is demonstrating a clear commitment to the region"

Both Air France-KLM and Deutsche Lufthansa remain in talks to buy a stake in Alitalia, the head of the group buying the Italian airline said, rejecting speculation that the French carrier had already sealed the deal.

"We are concluding our considerations on a foreign partner," CAI Chairman Roberto Colaninno told reporters after the group's board approved raising up to 1.1 billion euros ($1.42 billion) to finance the acquisition of the bankrupt Italian carrier.

CAI, a consortium of 16 top Italian business groups, has agreed to buy Alitalia's best assets for 427 million euros in a bid to relaunch it as a smaller, more efficient carrier.