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ROME (Reuters) - Loss-making Italian airline Alitalia CAITLA.UL risks having to file for bankruptcy if it fails to agree a deal for a capital increase in the next couple of weeks, a government source said on Tuesday.
Alitalia needs about 500 million euros ($680 million) to stay in business and invest in a new turnaround strategy, analysts have said, after accumulating losses of more than 1 billion euros and debt of a similar size since being rescued from bankruptcy in 2009.
Its shareholders, a disparate group of 21 Italian investors including bank Intesa Sanpaolo (ISP.MI) and road operator Atlantia (ATL.MI), will vote on a capital increase of at least 100 million euros on October 14 to keep the business running as it seeks fresh bank financing and a longer-term solution to its financial plight.
"Alitalia risks filing for bankruptcy if no solution on the capital increase is found in a couple of weeks," the source told Reuters.
The airline has also fallen behind in its payments for fuel, suppliers have said, and could face the prospect of having to ground its fleet.
"In four or five days Alitalia risks not being able to fly," the government source added.
The company said on September 26 that it had total available cash of 128 million euros, including unused credit facilities.
Such a sum would not last long. Andrea Giuricin, a transport analyst at Milan's Bicocca University, estimates that Alitalia needs at least 10 million euros a day to keep its aircraft flying and has annual operating costs of at least 3.7 billion euros.
Concern over Alitalia's finances is such that civil aviation authority ENAC will summon representatives from the company in the next few days to assess its business prospects, a source close to the situation said on Tuesday.
Italy's government and Alitalia shareholders have been betting on Air France-KLM (AIRF.PA) raising its stake from 25 percent and possibly even taking control of the group, but there remain disagreements over financial commitments and business strategy.
A meeting between the government and Alitalia management on Tuesday finished without a solution.
"We are working on it, there are various ideas, but there is no solution yet," Transport Minister Maurizio Lupi said.
Alitalia Chairman Roberto Colaninno told the board at a meeting on Tuesday the government is "finishing up its analysis of the situation in order to define the necessary measures", the company said. The board will meet again on Thursday.
Alitalia is confident that support from creditor banks will enable it to sort out its finances, it said.
Alitalia's new CEO Gabriele Del Torchio is pinning turnaround hopes on the more lucrative long-haul market after the company's attempt to become a strong regional player was scuppered by aggressive competition from low-cost carriers Ryanair (RYA.I) and easyJet (EZJ.L).
The chief executive of Air France-KLM has indicated that the two airlines could complement each other in the long-haul segment.
Alitalia is part of SkyTeam, a business grouping of 19 airlines that allows them to sell seats on one another's flights, thereby extending their network without adding routes.
"Alitalia is an important partner. If it leaves the SkyTeam alliance, the loss of revenues for Air France-KLM could reach 100 million euros a year," Kepler Cheuvreux analyst Pierre Boucheny said, adding that he expects the group to back Alitalia only if it is guaranteed control of strategy.
However, the Italian side is determined not to sell too cheaply.
"This is a tug of war over the price," said transport analyst Giuricin. "Air France-KLM would like to buy Alitalia as cheaply as possible, preferably without having to take on its debt, while the Italian shareholders want to get something out of this as well."
Italian shareholders will also take some convincing before giving up their say on company strategy, with the government considering Alitalia to be a key national asset that employs 14,000 people.
Alitalia shareholder and Deputy Chairman Salvatore Mancuso was quoted on Monday saying he was not in favor of a takeover by Air France-KLM, citing the risk of significant job cuts and a deep restructuring.
Rome has been looking for a public entity that could invest 100 million euros in Alitalia before a tie-up with a partner, sources said, although Transport Minister Lupi denied the state had asked railway group Ferrovie dello Stato to buy into it.
Additional reporting by Alberto Sisto and Stefano Bernabei in Rome, Matthias Blamont in Paris; Writing by Agnieszka Flak; Editing by Paola Arosio and Pravin Char