Alitalia may run out of cash in months-Citigroup
ROME, July 28 (Reuters) - Alitalia AZPIa.MI could run out of cash after the end of the year without a new injection of funds, Citigroup analysts said, predicting the ailing Italian airline will burn through 550 million euros of cash this year.
Alitalia was on track to wipe out its cash by the third quarter, but was granted some breathing room by an emergency government loan, the analysts said in a research note.
"The government loan of 300 million euros (which is subject to state aid investigation by the European Commission) should help Alitalia survive to the end of 2008 but could be insufficient from 2009 onwards," Citigroup said.
Italy's government, which owns a 49.9 percent stake in Alitalia, is working on its third attempt to save the airline after a planned sale to Air France-KLM (AIRF.PA) fell through.
Citigroup said a merger with smaller Italian carrier Air One appeared to be the only "meaningful solution" now, combined with a grounding of obsolete planes that would halve capacity. It estimated a 1 billion euro equity injection is needed.
The bank painted a grim picture of the airline's financial prospects, forecasting net losses of 720 million euros this year and substantial writedowns on its aging fleet.
It expects Alitalia to post a 20 percent drop in revenues when it reports second-quarter results on Aug. 8, driven by cutbacks in Milan and a 23 percent fall in traffic. (Reporting by Deepa Babington; Editing by Paul Bolding)
