Alitalia loan stirs rescue hopes

Business Materials 24 April 2008 05:21 (UTC +04:00)

(bbc) - Italy's next Prime Minister Silvio Berlusconi has said that an emergency loan to Alitalia makes it more likely that the problem airline will be saved.

Mr Berlusconi, who is due to take office in about a month, said a group of firms and banks were now expected to put together a rescue package.

However, Mr Berlusconi failed to give any details of the firms involved.

Alitalia is on the verge of collapse and needed a loan of 300m euros ($475m) on Tuesday in order to keep operating.

The funds will keep Alitalia going for a couple of months while Mr Berlusconi examines options for its future.

He said that the extra time would allow a group of Italian entrepreneurs, aided by banks, professionals and airlines, to study Alitalia's accounts.

"After due diligence of three, four or five weeks, this new group will present a binding offer and take over the running of Alitalia, which will involve a painful reduction in personnel," he explained.

Talk collapse

The latest round of problems at Alitalia were prompted by Air France KLM's decision to drop a takeover bid for the firm after opposition from unions.

Alitalia is haemorrhaging cash and it was feared that Air France's withdrawal would force the firm to seek bankruptcy protection.

Mr Prodi announced the 300m-euro financial support following a cabinet meeting.

"Silvio Berlusconi asked me to provide a more considerable bridge loan than the one we had foreseen in order to have time to put together and organise possible alternative solutions to this problem," Mr Prodi said.

The loan is likely to be investigated by the European Commission, which has been cracking down on state subsidies for the aviation industry.