UPDATE 1-Italy to inject 3 bln euros in new Alitalia - minister

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ROME, May 7 (Reuters) - The Italian government will inject at least 3 billion euros ($3.2 billion) fresh capital into Alitalia, the industry minister said on Thursday, laying out the plan for the nationalisation of the ailing carrier.

Rome is preparing to retake control of the loss-making airline after 11 years of difficult private management and three failed restructuring attempts.

The government was forced to cancel a planned sale of the carrier as Alitalia’s deep-rooted financial problems were exacerbated by lockdowns to stem the new coronavirus crisis that have devastated the airline industry.

Under a first 25-billion-euro stimulus package approved in March to tackle the coronavirus crisis, the government earmarked 500 million euros for the whole airline sector, the bulk of which would go to Alitalia.

The steady stream of state aid spent to keep the airline afloat has triggered political bickering. Lawmakers and government officials disagree about what would be the best way to rescue the carrier, who would be its suitable partner or whether it should be simply allowed to fail.

“The government’s intention is not to make yet another bailout. We aim to relaunch the flag carrier,” Industry Minister Stefano Patuanelli said, speaking at the Italian Senate.

On Wednesday the Labour ministry said it had given a green light to place 6,622 Alitalia workers on a temporary layoff scheme until October.

Patuanelli said Rome would do its best to protect current job levels at the airline, which currently employs 11,132 people.

The carrier this week suspended its daily direct flight between Rome and New York until the end of May, cancelling its last long-haul connection still operating during the virus crisis.

The move has raised concerns among unions, who worry about a further shrinking of the company, which in recent years has seen its market share gradually eroded by both low-cost carriers and bigger rivals.

Patuanelli tried to soothe those concerns telling the Senate that, under state control, Alitalia would “focus strongly on long-haul routes, also with new transatlantic alliances.”

Alitalia is currently in negotiations with Delta Air Lines over the future of a joint-venture with the U.S. carrier and Air France-KLM on the North American market, which is expiring later this month.

The new Alitalia will continue to operate with the current fleet of less than 100 aircraft, but “it will have to be ready to add new aircraft,” Patuanelli said.

He added the government was also considering an expansion of the cargo business.

$1 = 0.9262 euros Editing by Agnieszka Flak;Editing by Elaine Hardcastle