Berlusconi vows to keep Alitalia flying

ROME/MILAN (Reuters) - Silvio Berlusconi, Italy's next prime minister, vowed to do everything possible to keep Alitalia in the air as its management said time was fast running out for the state-owned airline to survive.

"There's little money, there isn't the time, it's a dramatic situation," Alitalia Chairman Aristide Police said, according to a union source at a meeting with management.

Alitalia's planned takeover by world leader Air France-KLM fell apart before the election over union opposition but Italy's outgoing government had been working to revive it.

Berlusconi, who swept to power on Monday after the vote, said the airline's survival would be one of the first "emergencies" he would address after taking office -- which might not be for another month in Italian procedures.

"We've got to sort it out quickly and well," he said at his first press conference after winning power.

"Everything that is necessary to keep the flag carrier working and remaining to support tourism and the economy will be done," he told Italian radio earlier.

Late on Tuesday, Prodi's office released a statement in which it said it would seek an urgent meeting with Berlusconi or one of his aides, in the light of his comments.

"The government feels it is indispensable that the situation is dealt with in depth in an urgent meeting with a representative of the leader of the coalition that won the election," it said. Unions had called for bipartisan talks.

Billionaire businessman Berlusconi had used the prospect of Alitalia being taken over by a foreign airline as a rallying cry during his election campaign.

He continues to promise he has "tens of business owners" ready to invest in the airline.

Alitalia, whose shares were suspended on Tuesday before closing up 18 percent at 0.59 euros, has a market value of under 700 million euros and about 1.37 billion euros of debt.

Critics attacked Berlusconi's comments as campaign rhetoric that risked pushing the carrier closer to bankruptcy and the outgoing government has maintained the only alternative to the Franco-Dutch buyer is administration.

WEEKS TO GO?

Alitalia's ready cash is shrinking by about 3 million euros a day and now has funds left only for the immediate future -- a question of weeks or at most a couple of months, observers say.

The outgoing government has refused a bridge loan for the flailing company, saying a deal must be in place before more money can be granted.

Italy's aviation authority says Alitalia risks losing its license unless it can detail plans for new funding.

IATA, the airline industry association, has told Alitalia it must provide guarantees to be able to stay in IATA's system to settle ticket purchases if it were to go into administration.

The European Union has banned any more state funding but unions said on Tuesday this might not be an obstacle to Berlusconi's new government.

"The government must make a bridge loan or back a line of credit to Alitalia without worrying about Europe," the Fit-Cisl union said. "Italy already has 50 infraction actions, one more won't change anything."

Air France-KLM has said it is up to unions and Alitalia management now to decide the airline's future. It wants the new government's blessing for any deal.

Given the country's parliamentary procedures, it will have to wait about a month to get an answer.

Berlusconi wouldn't be drawn on Tuesday on the chance of further talks with Air France-KLM, saying he could not say and would wait until he had the reins of power.

Even if Berlusconi were to consider a deal with Air France-KLM, he could face resistance from a key political ally, the Northern League, which will be the third-largest force in the new parliament.

The separatist party had campaigned against Alitalia's decision to reduce operations at financial capital Milan's Malpensa hub, in a key area of its support.

The airline has already started cutting the number of flights out of the northern airport -- a plan Air France-KLM has said it would carry out if its takeover succeeded.

Berlusconi linked the flagship's future on Tuesday to Milan's role as host of a major exhibition in 2015.

"It would be the last straw if there wasn't an important hub near Milan after it won Expo 2015, and if we didn't have a flagship airline to bring in all the tourists," he said.

(Additional reporting by Alberto Sisto in Rome)

(Editing by Elizabeth Fullerton, Elaine Hardcastle, Richard Chang)