Italy`s failing flagship airline Alitalia has delayed a decision on a foreign partner until the end of the year, the Radiocor news agency reported Wednesday.

The investor group Italian Air Company (CAI) poised to take over the airline could not be reached for comment on the report.

The decision -- likely between the Anglo-Dutch giant Air France-KLM or Germany`s Lufthansa -- had been expected in the coming days.

However, remarks in favour of Lufthansa by Italian Prime Minister Silvio Berlusconi during a visit to Italy by German Chancellor Angela Merkel on Tuesday caused the postponement, Radiocor said, quoting sources close to CAI.

Berlusconi said that Rome and Berlin viewed potential cooperation between Alitalia and Lufthansa `very favourably` and that the German airline presented `numerous advantages` for Milan`s Malpensa airport.

Berlusconi, who himself hails from Milan, won April elections in coalition with the regional Northern League party, which is lobbying for Alitalia to partner Lufthansa.

The prime minister`s remarks came as CAI was about to announce its preference for Air France-KLM, news reports said.

Ahead of the April polls, Berlusconi notably opposed an offer for the Italian government`s 49.9 percent stake from Air France, saying he wanted the airline to stay in Italian hands.

The revamped Alitalia is due to take off on December 1.

CAI is to retain 12,500 Alitalia workers while cutting some 3,250 jobs.