Maurizio Prato has tendered his resignation as Alitalia chairman
Air France-KLM's takeover of Alitalia has been abandoned and the Italian airline's chairman has resigned.
Maurizio Prato stood down after the breakdown of talks between Alitalia's unions and Air France-KLM management.
He had warned the unions that Alitalia risked going bankrupt if they did not accept the deal.
The Italian government has been trying for more than a year to sell its 49.9% stake in the troubled national airline and says there are no other bidders.
Earlier, Economy Minister Tommaso Padoa-Schioppa said the only alternative to the Air France-KLM offer would be to put Alitalia into emergency administration.
He also said a 300m euro ($470m; £236m) state bridging loan to Alitalia would be impossible unless the Air France-KLM deal was signed.
Air France-KLM's offer to buy Alitalia for 0.10 euros per share would have needed union backing to go ahead.
Alitalia has called a board meeting for Thursday, "which will decide the appropriate steps", the airline said in a statement.
The government's sale of Alitalia has been opposed by Milan's airport operator and prime ministerial candidate Silvio Berlusconi.
Mr Berlusconi's opposition was a particular problem because there are elections due in April, which could bring him to power.
Alitalia shares have been fluctuating wildly for weeks and were suspended earlier in the day.
"Never in the history of the state's privatisations have so many and such difficult elements come together," Mr Padoa-Schioppa told a parliamentary hearing on Alitalia.