Page last updated at 14:00 GMT, Thursday, 24 April 2008 15:00 UK

EU presses Italy on Alitalia loan

Alitalia plane
Alitalia is on the brink of being grounded

The European Commission has raised concerns that an Italian government loan given to Alitalia is illegal state aid and is seeking more details.

The Commission said it would send a letter to the government asking for clarification about the nature of the 300m euro ($472m; 239.2m) loan.

The lifeline was given to keep the debt-laden airline from collapsing until a buyer stepped forward.

Air France-KLM scrapped its bid last week amid opposition from unions.

Agreeing to the loan earlier in the week, the outgoing Italian government of Prime Minister Romano Prodi insisted it was made on commercial grounds.

But the European Commission has doubts.

Under European Union rules, EU governments are forbidden from subsidising struggling companies that could give them an unfair advantage over rivals except under exceptional circumstances.

Rival airlines, including Ryanair and British Airways, have said they will be closely following the outcome.

"This latest bailout makes a mockery of EU state aid rules," said Ryanair's head of legal affairs, Jim Callaghan.

"Propping up an inefficient national airline, which would have gone bankrupt long ago, is simply illegal," he added.

Choppy ride

Alitalia, which is bleeding about 1m euros a day, has had state handouts before to keep it in the air and could be dragged to court if Brussels concludes that the 300m euro loan represents state aid.

It has had a choppy ride over the past few years and has recently flirted with bankruptcy.

A number of interested suitors, the latest being Air France-KLM, have been forced to throw in the towel for varying reasons.

Silvio Berlusconi, who will take over from Mr Prodi in mid-May, has said that the loan would allow extra time for a group of Italian entrepreneurs, banks and airlines to study Alitalia's accounts in view of making an offer to buy the flag carrier.

Securing Alitalia's future was one Mr Berlusconi's main election pledges as he impressed on the electorate the importance of keeping it under Italian ownership.

Alitalia loan stirs rescue hopes
23 Apr 08 |  Business
Air France scraps Alitalia bid
21 Apr 08 |  Business
'Short term' survival at Alitalia
08 Apr 08 |  Business
Union threatens Alitalia takeover
31 Mar 08 |  Business

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