Alitalia flies into critical week

By Jo Winterbottom and Svetlana Kovalyova

MILAN (Reuters) - Alitalia faces a critical week of board meetings, labor talks and a change of government as the state-owned airline balances precariously between seeking protection from creditors or being swallowed by Air France-KLM.

"Tomorrow is another day and we need to see how much fuel Alitalia has left," Giulio Tremonti, who could handle the sale if opposition leader Silvio Berlusconi wins a general election on April 13-14, said on a television show on Sunday.

Alitalia's future has become a political football ahead of the general election with Berlusconi calling Air France-KLM's offer unacceptable and calling for a home-grown team of businesses to come forward to buy the airline.

Air France-KLM's board meets on Monday after its Chief Executive Jean-Cyril Spinetta last week gave up trying to persuade Alitalia's unions to accept his company's takeover, which includes job cuts of some 10 percent of the work force.

Spinetta, whose airline is the world's biggest by sales, said last week he did not have board approval to consider a new proposal from unions, which focused on fewer job losses.

The government of Prime Minister Romano Prodi, which approved the sale to Air France-KLM, has called on unions to soften their stance and said the only alternative to a takeover is special administration.

Further state aid for the airline, which bleeds more than 1 million euros a day, is forbidden by the European Union.

Current Economy Minister Tommaso Padoa-Schioppa on Saturday urged unions to change tack by Monday. The government owns 49.9 percent of the airline and Spinetta has said he would want approval from the next administration after the election.

Senior labor leaders on Sunday said unions were willing to return to the negotiating table, but talks would take time.

"If you want to have a dialogue, you cannot say take it or leave it within 24 hours," Guglielmo Epifani, head of one of the airline's main unions, told La Stampa newspaper on Sunday.

SHARES SUSPENDED

Alitalia's board, under a new chairman after Maurizio Prato threw in the towel last week, will meet on April 8 to decide whether it must seek protection from creditors.

Its shares are suspended from trading until then.

The airline, which has about 1.2 billion euros of debt, has said it will need a cash injection by mid-year to keep on flying.

Air France-KLM's plans included a 1 billion-euro capital increase for Alitalia, along with an all-share offer that pegged the company's market worth at around 138 million euros and a deal on its bonds.