Alitalia rescue plan hits the skids, Delta still interested in 10%

MILAN (Reuters) - An Alitalia rescue plan ran into trouble on Wednesday when its main sponsor, railway group Ferrovie dello Stato, said conditions were not in place to set up an investor consortium to save the struggling Italian carrier.

Alitalia, which has been run by administrators since May 2017, is burning through cash reserves and is expected to run out of money at the end of this year.

The company risks liquidation if no credible investor makes an offer and injects fresh funds.

Ferrovie’s comments came a day after infrastructure group Atlantia, touted to be one of the key potential investors in Alitalia together with a foreign airline, said it was not ready to join a consortium.

Ferrovie and Atlantia have been discussing a joint investment in Alitalia for months with U.S. carrier Delta and, more recently, Germany’s Lufthansa.

Delta Air Lines Inc has stuck to a pledge to invest up to 100 million euros ($110.70 million) for 10% of Alitalia, but sources say it has not reached any agreement with Ferrovie and Atlantia over the Italian carrier’s long-haul business.

“Our interest and vision have been well expressed to Ferrovie dello Stato and Italy’s Ministry of Economic Development,” Delta said in an emailed statement on Wednesday.

“We are open to working with other parties to develop a coherent, like-minded consortium of investors,” it said.

Ferrovie also said it was still committed to talks to save the Italian carrier, adding it was awaiting indications from administrators over what measures to take.

A deadline for binding bids for Alitalia expires on Thursday at midnight after several postponements.

One source close to the matter said Alitalia administrators would meet Italy’s industry minister Stefano Patuanelli on Thursday to discuss the situation.

“I believe there is still room ... with Delta, Lufthansa... to reach a conclusion,” Patuanelli said on CNBC TV on Wednesday evening.

But he added he did not want to postpone the expected closing date of end-March for any rescue package, by which time any deal should have secured all necessary approvals.

Patuanelli said Lufthansa should “make a small effort” to take a stake in the Italian carrier from the off. On Tuesday the German carrier sent a letter to Ferrovie offering merely a commercial partnership for Alitalia.

The minister also asked Delta to make an additional effort to improve its offer.

Additional reporting by Angelo Amante and Tracy Rucinski; Editing by Alexandra Hudson and Richard Chang