Rome rides to the rescue of ailing Alitalia

Reuters

* State-owned Poste Italiane to take part in Alitalia cashcall

* Government demands radical new plan, break with the past

* Government wants help from additional shareholders

* Alitalia board meets on Friday

By Steve Scherer and Valentina Consiglio

ROME, Oct 10 (Reuters) - The Italian government offeredfinancial support on Thursday to help rescue Alitalia using thestate-owned post office, but said it wanted radical change atthe national airline and shareholders to join a life-savingcapital increase.

Alitalia needs 500 million euros ($676.12 million) to avoidimminent bankruptcy and its main fuel provider, Italian oil andgas giant Eni, has threatened to stop supplies thisweekend if a rescue plan is not approved.

Poste Italiane, the postal services group which alsocontrols cargo and charter passenger airline Mistral Air, wouldparticipate in a capital increase for the flag carrier, thegovernment said in a statement.

The government said it regarded Alitalia - which has notturned in a profit since 2002 and is struggling to keep uppayments on one billion euros of debt - as a strategic asset.

However, Rome wanted shareholders, including top investorAir France-KLM, to share in the burden of the capitalincrease for the airline, which was privatised in 2008.

It gave no financial details but said that if Alitalia couldimplement a radical change of strategy, the government was readyto help with "the strategic and financial instruments thecountry can rely on".

Sources close to the situation had told Reuters the rescueplan envisaged the state injecting 150 million euros into theairline, the same amount as existing shareholders, while bankswould provide an additional 200 million euros in new loans.

"It's a bridging solution to guarantee the financialsurvival of the company but it depends on a strong change in theway the company is run," one of the sources said, speaking oncondition of anonymity.

Under the rescue plan, Poste Italiane would inject 75million euros into Alitalia through the capital increase, thesources had told Reuters. The rest of the state help would comein the form of credit guarantees, the sources said.

Alitalia's board is to meet on the bailout plan on Friday.

One source said the government was still pinning itslonger-term hopes on a strategic partnership between Alitaliaand Air France-KLM, which owns 25 percent of the Italiancarrier.

Ministers have approached several state companies in thepast few weeks, including railway operator Ferrovie dello Stato,trying to persuade them to stump up funding for Alitalia.

Spain's Telefonica recently did a deal to take overthe controlling company behind Telecom Italia. PrimeMinister Enrico Letta is loath to see another national assetfail or be sold to a foreign rival without guarantees on safeguarding jobs.

Air France, which is in the middle of a restructuringitself, was barred from staging a full takeover of Alitalia inlate 2008 by then-Prime Minister Silvio Berlusconi.

Berlusconi instead strung together a disparate group of 21investors including retail bank Intesa Sanpaolo andhighway operator Atlantia.

Since then, Alitalia has lost nearly 700,000 euros a day andbecome a symbol of Italy's economic malaise, hampered bymismanagement and political meddling.

Now the government and Alitalia's shareholders are ready tolet Air France raise its stake and possibly even take over thegroup, but there is no agreement with the Franco-Dutch carrierover financial commitments and business strategy.

Alitalia, which according to analysts needs at least 10million euros a day to keep its aircraft flying, said on Sept.26 that it had total available cash of 128 million euros,including unused credit facilities.

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