November 25, 2019 / 8:03 AM / 16 days ago

Alitalia to receive additional taxpayers' money after rescuers backtrack - sources

MILAN, Nov 25 (Reuters) - The Italian government will lend additional money to carrier Alitalia to keep it afloat after a group of potential rescuers backtracked last week, two sources close to the matter said.

By granting a new 400 million euro ($441 million) loan to the loss-making airline even if there is no buyer at the horizon, Rome will challenge state aid rules with the risk of angering the European Commission, one of the sources said.

Italy’s industry ministry did not respond to a request for comment.

Alitalia has already received 900 million euros from the government since May 2017, when it was put into special administration following a failed restructuring attempt.

It has neither repaid this loan nor the 150 million euros in interest due on it.

Despite several cost-cutting measures implemented since May 2017 by the three state-appointed administrators running it, the carrier is leaking cash and is expected to run out of money by year-end.

Italian railway group Ferrovie dello Stato, which was in talks with infrastructure group Atlantia and U.S. carrier Delta Air Lines, said last week it was not yet able to form a consortium of rescuers for the carrier.

Even German carrier Lufthansa, which offered a commercial partnership with Alitalia, said it was not prepared to invest in the Italian airline.

After granting Ferrovie more than a year to present a plan for Alitalia, Rome has decided to appoint a new administrator and unlock 400 million euros it had earmarked for the airline subject to the condition that the railway group presented a binding offer.

That condition has now been scrapped, the sources said.

Without fresh financial resources the airline would face liquidation, putting at risk 11,600 jobs and creating a major headache for the government.

“The industry ministry will ask the current administrators to quit to make room for a new administrator who will have the mandate to cut the carrier’s workforce and airplanes,” one of the sources said.

“Rome will use the appointment of a new administrator as a way to bypass EU state aid rules and grant an additional 400 million euros to Alitalia,” the source added.

Industry analysts calculate Alitalia has already burnt through roughly 9 billion of euros in taxpayers’ money.

$1 = 0.9073 euros Additional reporting by Giuseppe Fonte; Editing by Jan Harvey

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