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Italian authorities warn they could revoke Alitalia license

Italian aviation authorities warned on Tuesday that they could revoke Alitalia's license if it cannot meet its obligations, including safety guarantees.

india Updated: Apr 22, 2008 15:52 IST

Italian aviation authorities warned on Tuesday that they could revoke Alitalia's license if it cannot meet its obligations, including safety guarantees, after Air France-KLM abandoned an offer that might have saved the struggling Italian airline.

Trading in Alitalia shares has been suspended on the Milan stock exchange as authorities await some statement from the airline. Under European rules, for an airline to have a license "they have to see that there's continuity, among other things, for safety," Vito Riggio, chairman of Italy's civil aviation agency ENAC said. "They have to guarantee they have (financial) coverage for at least a year."

Riggio told a talk show on state radio that ENAC could either yank Alitalia's license or give it a provisional one if the airline cannot save itself financially. He did not give a time frame for any decision.

But Alitalia is running out of time. Losing some euro1 million (US$1.6 million) a day, the airline is lurching toward possible bankruptcy protection that could force it to lay off thousands of employees and eliminate unprofitable routes.

Italy's outgoing government was expected to convene a special Cabinet meeting soon to try to save Alitalia, possibly with a bridge loan to help it pay its bills.

The state owns 49 percent of the flagship carrier, and has been trying to unload the loss-maker for months.

Air France-KLM's announcement Monday night that it considered no longer valid its offer _ one that Alitalia had accepted but that Italian union leaders had balked at _ appeared to doom the only viable offer.

"Bankruptcy protection, or bank loans or funds .... the real point is ... how does Alitalia plan to meet its commitments?" including guaranteeing the ability to pay for operations essential to safety, Riggio said.

Media magnate Silvio Berlusconi, who won elections last week for the premiership, had lobbied against the Franco-Dutch offer and promised during his campaign that Italian businessmen would come forward to rescue Alitalia, but no Italian deal has emerged.

A transport union leader, Marco Veneziani, contended that Berlusconi's resistance was a main factor in the
collapse of the Air France-KLM deal.

He held out hope that Italy's next goverment, under a Berlusconi premiership, could entice Air France-KLM back to negotiations." "The new government must really take this on with deeds and not words," Veneziani, a UIL union official, told Sky TG24.

Air France-KLM said its offer to buy Alitalia for euro139 million (US$220 million) was "no longer valid," and did not suggest that it planned to return with another offer.

The French-Dutch carrier said its Italian counterpart has failed to clarify the "legal situation" after talks on a possible takeover were broken off earlier this month.

Berlusconi last week seemed to soften his stance against the Franco-Dutch offer, saying it would be OK as long as Alitalia emerges on an equal footing with the other two airlines. A top Berlusconi ally, Roberto Maroni, dismissed the possibility of a bridge loan to save Alitalia. Maroni is a leader of the Northern League, a regional party that vigorously opposed the proposed deal's plan to strip Milan's Malpensa airport of hub status.

Sen Giorgio Tonini said bankruptcy protection would probably entail slashing 6,000-7,000 jobs from a 17,000-strong work force. "Only money-making flights would be allowed to fly," the senator said on radio.

Air France-KLM's offer, announced March 14, called for the layoffs of 2,120 Alitalia employees, among other measures.