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UPDATE 1-Italy looking for two bids for airline ITA as deadline looms -sources

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(Adds Lufthansa comment, details, background)

By Francesca Landini and Giuseppe Fonte

MILAN, May 23 (Reuters) - Italy expects to attract at least two rival bids for ITA Airways, the successor to Alitalia, before the deadline for its part privatisation expires at midnight on Monday, two sources close to the matter said.

Shipping group MSC, which is working with Germany's Lufthansa, is seen as the leading candidate, but a consortium comprising U.S. private equity fund Certares, Air France-KLM and Delta Air Lines Inc is also expected to make a competitive offer, the sources said.

Italy's Treasury managed the bidding process to ensure there would be competition among the contenders, both sources said, with one adding that both Air France and Delta were considering an investment in ITA, should Certares' bid be successful.

U.S.-based Indigo Partners, an investor in low-cost carrier Wizz Air which expressed its interest in ITA, is expected to drop from the race, the sources said, adding that the rule that requires the majority shareholder in a European airline be based in Europe proved a hurdle for the fund.

A Lufthansa spokesman confirmed the German airline presented a joint offer with MSC, but did not give any details.

Delta Air Lines, Indigo Partners and Certares did not respond to a request for comment.

An Air France spokesperson reiterated that the airline was willing to strengthen its commercial ties with ITA but declined further comment.

Under a government decree, Rome plans to privatise ITA through a direct sale while retaining a minority, non-controlling stake in a first stage. It hopes to clinch a deal with the prospective buyer before the summer break.

Rome will review the bids looking not only to the price offered for ITA, but also to the commitments the suitors are ready to take to invest in the carrier, one of the sources said.

A decision over which consortium will be granted exclusive talks is expected in the coming weeks.

MSC, also known as Mediterranean Shipping Group, is hoping to forge an air freight and passenger business to dovetail with its sea cargo and cruise operations.

French shipping firm CMA CGM said last week it was taking a stake in Air France-KLM as part of an air cargo partnership, betting on growing demand for flying goods around the world as supply chains remain snarled due to the pandemic. (Additional reporting by Ilona Wissenbach, Abhijith Ganapavaram; Writing by Keith Weir; Editing by Bill Berkrot)

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