* Board backs 300 mln euro capital increase to avert bankruptcy
* Shareholder Air France-KLM yet to decide whether to back cash call
* Move seen as buying time before talks on long-term future
By Alberto Sisto
ROME, Oct 11 (Reuters) - Italy's near-bankrupt Alitalia was thrown a lifeline on Friday when its board members - including cautious top shareholder Air France-KLM - approved a capital increase as part of a government-led 500-million-euro bailout.
The 'yes' vote means Alitalia's planes can keep operating beyond the weekend, something that had looked in doubt after major creditor Eni threatened to cut fuel supplies unless the airline could show it had solid financial underpinning.
But with Alitalia, which last turned a profit in 2002, spending some 10 million euros a day according to analyst estimates, the new cash injection will not last long. It is regarded as a stop-gap solution before politically sensitive talks with Air France on a possible combination of the two.
After failing to persuade some of Italy's national companies to help, Italy's cash-strapped government only finalised the emergency funding plan late on Thursday.
Alitalia said the state-owned post office will put in 75 million euros for any unsubscribed shares in a 300-million-euro capital increase offered to existing shareholders, while banks Intesa Sanpaolo and Unicredit will guarantee to subscribe for up to 100 million euros not taken up.
The two banks will also provide a bridge facility of 100 million euros to meet Alitalia's immediate needs that will be converted into equity as part of the cash call or repaid.
A further 200 million euros will be provided in the form of new and existing credit lines, Alitalia said in a statement.
Top shareholder Air France-KLM, with a 25 percent stake and in the middle of its own restructuring, said it would only make a decision on whether to take part in the cash call after Alitalia's shareholder meeting scheduled for Monday.
"The decision by the Air France-KLM board members to support the emergency plan does not in any way presuppose our decision on whether to subscribe to the capital increase," a spokesman said. The Franco-Dutch group had said earlier on Friday it would place tough conditions on giving any help.
The carrier was barred from a full takeover of Alitalia in late 2008 by then prime minister Silvio Berlusconi who instead strung together a disparate group of investors. In the intervening five years Alitalia has lost 700,000 euros a day.
Now the government and Alitalia's shareholders are ready to let Air France up its stake and possibly even take over the group, but the parties have so far failed to agree financial commitments and business strategy.
Business leaders said the state-funded plan lacked a clear strategy to make the airline a long-term viable business.
"If it's an emergency band-aid to stop the bleeding, so be it. But we'll need to have a serious think about a plan in the medium and long term once and for all," said Giorgio Squinzi, the head of business lobby Confindustria.
Air France-KLM Chief Executive Alexandre de Juniac is open to taking over its Skyteam alliance partner to bolster its access to the Italian travel market, Europe's fourth largest. But approval from his board, which includes the French state and sceptical members of Dutch KLM, is not certain.
"Air France-KLM have the strength and the upper hand because they are the only partner that can continue with Alitalia now, but they will do so on their own terms which will be fairly draconian," said airline industry analyst James Halstead, managing partner at UK-based Aviation Strategy.
"They will want to be able to make decisions without interference from politicians, government and other shareholders who may have other agendas," he added.
The Rome government is realising it may not be able to hold on to its flag carrier, once a national icon which had its uniforms designed by Armani but is now seen as a symbol of the country's economic malaise.
However, with the current loan arrangement, Rome is trying to strengthen its negotiating position with Air France-KLM, analysts say, even though no other option makes business sense.
"The state is re-nationalising its flagship airline with taxpayer's money," said Andrea Giuricin, a transport analyst at Milan's Bicocca university. "This solution will only allow Alitalia to survive, certainly not grow."
At stake: What the government says is a strategic asset, 14,000 jobs, and fears that some of Alitalia's domestic routes - which play an important role because of Italy's patchy rail and road links - could be cut if a foreign buyer took over.