UPDATE 2-Alitalia clings on as takeover waits, vote looms

(Adds details from statement in paragraphs 5-6)

By Jo Winterbottom

MILAN, April 8 (Reuters) - Alitalia (AZPIa.MI: Quote, Profile, Research, Stock Buzz) has won a stay of execution as its board declared the state-owned airline had funds to keep going "in the very short term," with its takeover by Air France-KLM on standby and a general election at the weekend.

The board had been expected to decide whether it had to put the company into special administration after Air France-KLM (AIRF.PA: Quote, Profile, Research, Stock Buzz) gave up talks with unions last week and said it was up to workers to decide the Italian flagship's future.

"As of March 31, cash and short-term financing ... amounted to around 170 million euros," Alitalia said in a statement. It made no mention of whether special administration was discussed.

The airline loses more than 1 million euros a day and soaring oil prices could hurt its finances further.

Alitalia said the funds meant it had breathing space to take short-term initiatives to secure the company's survival. But it reiterated it needed "substantial financial support" in order to "confirm continuity of operations."

Alitalia also welcomed a statement Air France-KLM made on Monday, which appeared to leave open the possibility that the bid from the world's biggest airline might still be on the table -- a deal that includes 1 billion euros of fresh cash.

Without the bid, Alitalia faces a double deadline as both its funds run perilously low and its major shareholder, the Italian government, heads for an election on April 13 and 14.