CORRECTED - EU to OK Alitalia plan, but loan illegal -report

(Corrects to drops "centre right" description in sixth paragraph)

MILAN Oct 23 (Reuters) - The European Commission will approve an Italian investor group's takeover plan for struggling airline Alitalia AZPIa.MI but not a 300 million euro ($386 million) state loan, la Repubblica newspaper said on Thursday.

The Commission is expected to approve in mid-November the proposal submitted by the CAI consortium but impose some conditions, the newspaper said, citing people close to the situation.

Among the conditions are the creation of an independent trustee who will be chosen in consultation with the Italian government. The trustee will have to report periodically to the European Union on the privatisation, the paper said.

The bloc also requires Augusto Fantozzi, the state-appointed commissioner of Alitalia, to sell the carrier at market price.

The Commission wants the new company, made up of profitable assets sold to CAI, to remain separate from the old Alitalia, which will group the remaining operations and be run by the Italian government, the paper said.

The Commission will also say that the 300 million euro bridge loan the Italian government awarded Alitalia this year was not permissible since it is adjudged to be illegal state aid, la Repubblica said.

Separately, data from the Association of European airlines on Wednesday showed that passenger numbers at Alitalia were down 28 percent in September year-on-year. (Reporting by Ian Simpson, editing by Will Waterman)