Italian airline Alitalia's shares on Monday fell to a 2007 low on worries its sale by Rome may collapse after one of the two final bidders, Russia's Aeroflot, expressed concern about the price tag.

Aeroflot denied a report by Russian news agency Interfax that it had actually pulled out of the bidding for the Italian government's 49.9 percent stake but said a purchase would depend on price.

Everything depends on the conditions, Irina Dannenberg, spokeswoman for Aeroflot, said. We are not happy with the (price) conditions and do not intend to buy Alitalia at (just) any price.

With the only other bidder a much smaller Italian airline -- Air One -- Alitalia's auction process looks increasingly uncertain and risks failing altogether, said Giacomo Chiorino, who heads Nuovi Investimenti Sim.

I'm not sure this is going to end with anyone getting Alitalia, said Chiorino. The concern is that if you're left with only bidder, he gets much more negotiating power. Then they can bid what they want, and then it's up to the government to decide whether to accept it.

Alitalia shares were down 2.5 percent at 0.7565 euros in afternoon trade, giving it a market value of about 1 billion euros ($1.3 billion), after earlier dropping as low as 0.745 euros. Aeroflot's illiquid stock, majority owned by the Russian state, was up about 3.2 percent at 67 roubles.

NEGATIVE ON THE DEAL

Alexander Lebedev, the majority owner of National Reserve Corporation (NRK) which owns 30 percent of Aeroflot, said he was negative about the deal and believed the Russian airline's management was taking its cues from the government.

I can only suppose that they are listening to the government, which has a 51 percent stake, but I do not have a high opinion of the government or of the management of Aeroflot, he told Reuters by telephone from the Le Bourget air show outside Paris.

Another representative of NRK said the Russian airline was worried that a high price would make restructuring Alitalia, which loses 30 million euros a month, too difficult.

They expressed dissatisfaction with the organisational procedures for the tender, which in Aeroflot's opinion would not allow it to be effective in leading the company out of its crisis and are aimed at gaining the maximum price, Leonid Dushatin, a member of NRK's board of directors, told Reuters.

This is the main reason for Aeroflot's pessimism.

Formal internal discussion on the bid is likely to take place at an Aeroflot board meeting on June 23, he said. Binding offers must be submitted by July 2.

Italian airline Air One, owned by businessman Carlo Toto, is working with the country's biggest retail bank, Intesa Sanpaolo

Observers point out that Alitalia loses more in a year than Air One manages in turnover and say it would be ironic for the government to sell to Aeroflot, because it is also majority state-owned.

Last month a U.S. private equity consortium including TPG pulled out of the bidding.

Aeroflot said this month it had picked four banks to arrange an 800 million euro ($1.1 billion) credit to fund its bid, including its bidding partner UniCredit.

Italian Infrastructure Minister Antonio Di Pietro played down concerns over the auction and said he hoped that only those with an industrial plan to relaunch the airline remain in the end.

It always happens this way when there is an auction or competition, ANSA news agency quoted him as saying. At the beginning there are many. Then what happens is a natural selection.

(Additional reporting by Guy Faulconbridge in Moscow and Deepa Babington in Rome)

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