Alitalia limps on as liquidation looms

ROME (Reuters) - Alitalia SpA was still flying on Fridaybut the Italian flag carrier faced liquidation in a matter ofdays after a rescue plan collapsed.

The airline cancelled 20 flights at Rome's Fiumicinoairport but blamed that on normal operational reasons ratherthan a lack of cash to buy fuel -- something which could leadaviation authorities to ground its planes.

Suffering from the high fuel prices and an economicdownturn that have hit the sector globally, Alitalia has beenon the brink of collapse for years as political interferenceand labour unrest have bled it of cash and caused it to pile updebt.

A group of Italian investors withdrew their offer to buyprofitable parts of the airline on Thursday after unionsrefused to accept the job losses and salary cuts it proposed.

The government said the only hope was if the consortium,CAI, put its offer back on the table and unions accepted theterms.

"There is no alternative to CAI. We need to return to thenegotiating table because there is no-one else in the race,"Labour Minister Maurizio Sacconi told Italian radio.

He ruled out any further intervention from the state whichprovided a 300 million euro (237 million pound) loan earlierthis year to keep the airline, which loses more than 2 millioneuros a day, flying. The European Commission is investigatingthat loan to see whether it constituted illegal state aid.

Economy Minister Giulio Tremonti told a cabinet meetingrenationalising Alitalia -- an idea mooted in the press -- wasnot an option, a government source told Reuters. The state ownsa 49.9 percent stake in Alitalia; its floated shares have beensuspended from trading since June.

GROUNDED?

Alitalia has been operating under bankruptcy protectionsince the end of August and its special administrator is due tomeet Italy's civil aviation authority ENAC on Monday to seewhether it can retain its operating licence.

"If there is nothing concrete on the table, within a weekor at most 10 days, the aircraft will no longer be allowed totake off," ENAC chairman told financial daily MF.

Alitalia's special administrator, Augusto Fantozzi, isseeking offers for the whole airline or its assets but has beenturned down by the three major carriers he contacted.

"I have personally contacted the chairmen of Air France,Lufthansa and British Airways and they declined the invitationto make an offer, although they did express interest in theItalian market and the CAI initiative," Fantozzi wrote in anopen letter to newspaper Corriere della Sera.

Transport Minister Altero Matteoli told one newspaper itwas unrealistic to expect CAI to revive its offer unless theunions that had opposed it reversed their stance.

"If the unions were to call (CAI Chairman Roberto)Colaninno revising their position, maybe it would be possibleto reopen talks, but I say that very hypothetically," he toldLa Stampa.

Alitalia's collapse would be a major blow to Berlusconiwho, as leader of the opposition, said he would veto a plan tosell it to Air France-KLM, a deal which was also opposed byunions.

Air France-KLM withdrew its offer in April, shortly beforeBerlusconi won a landslide election victory.

Italian media have speculated other Italian companies mightbe persuaded to step in with a last-ditch rescue offer.

Mediobanca bank, touted as a white knight, would notcomment. "As the situation is so problematic and delicate forseveral reasons, silence is golden," said CEO Alberto Nagel.

(Additional reporting by Francesca Piscioneri and StefanoBernabei; Editing by David Holmes and Hans Peters)