Alitalia board starts bankruptcy proceedings

ROME (REUTERS) - Alitalia has decided to ask the government to place it under special administration, starting a process that will lead to the loss-making Italian airline being overhauled, sold off or wound up altogether.

Alitalia's board took the formal decision on Tuesday after workers rejected its latest rescue plan last week, making it impossible for the airline to secure funds from shareholders to keep its aircraft flying.

Once under administration, the government will appoint one or several commissioners to assess whether Alitalia can be restructured, either as a standalone company or through a partial or total sale, or should be liquidated.

The board made its decision after meeting shareholders on Tuesday, citing Alitalia's serious economic state, the unwillingness of its investors to refinance the company and the impossibility of finding a quick alternative.

A cabinet meeting on the issue has been called for later on Tuesday, two sources said.

The airline said its flight schedule would remain unchanged.

James Hogan, the CEO of Etihad Airways, which bought into Alitalia during the latest restructuring in 2014, said the Italian airline required "fundamental and far-reaching restructuring to survive and grow in future".

"Without the support of all stakeholders for that restructuring, we are not prepared to continue to invest," he said in a statement.

The company is losing about 1 million euros (S$1.53 million) a day and without government support risks running out of cash by the middle of May, sources have said.

The government has already thrown it a short-term lifeline, a bridging loan of up to 400 million euros to see it through the bankruptcy process.

Rival airlines including Lufthansa and Norwegian Air have shown little interest in buying Alitalia and creditors have refused to lend more money, putting more pressure on the government to find a way to save the flag carrier.

The government has ruled out renationalising Alitalia, an airline that was once a symbol of Italy's post-war economic boom but is now struggling to compete at home against low-cost carriers Ryanair and EasyJet.

Outraged at repeated bailouts that have cost taxpayers more than 7 billion euros over a decade, many Italians are urging the government to resist the political temptation to rush to its rescue again.

But with a general election due by May 2018, few Italians believe the ruling Democratic Party (PD) will stand by and watch Alitalia crash and its 12,500 workers lose their jobs.

Former Prime Minister Matteo Renzi, who became PD leader again on Sunday in a primary vote, has said he will have a plan for the airline by mid-May and it should not be broken up.

Alitalia was privatised in 2008 after entering administration earlier that year.