Bid talk freezes Alitalia shares

Alitalia is struggling to cope with large debts.

Shares in debt-laden airline Alitalia have been suspended after the Italian government began a new attempt to sell the struggling carrier.

The decision was made after Prime Minister Silvio Berlusconi launched the third initiative to find a buyer.

Separately, a newspaper report said the European Commission had decided that an emergency loan to Alitalia constituted illegal state aid.

The 300m euro (£237m) loan saved the carrier from almost certain collapse.

However, the Commission declined to comment on the report in La Repubblica newspaper, saying it was "still considering its analysis of the Italian proposal".

'Good solution'

Alitalia's shares were suspended by the Borsa Italiana because of a law allowing the government to find a buyer without having to update the market on how talks were going.

The government has spent almost 18 months trying to sell its controlling interest in the airline.

Earlier, Mr Berlusconi softened his stance on Alitalia partnering with Air France-KLM.

Mr Berlusconi had previously said that a takeover offer from the French-Dutch carrier - which has now been withdrawn - was "unacceptable"

But he has now said that such a deal could be a "good solution".

However, Air-France-KLM - which withdrew after union opposition - said restarting talks would be difficult.

"Alitalia will need to find accords with international partners," Mr Berlusconi said after talks with French President Nicolas Sarkozy.

"Air France could be a good solution."

'Uncertain future'

The Italian airline has warned that it needs an urgent injection of capital on top of a recent government loan in order to survive.

It was recently saved from collapse by a 300m-euro ($473m; £238.8m) government loan, which is under scrutiny to see if it breaches European state aid rules.

Last month, the carrier said that the collapse of the proposed takeover by Air France-KLM had left it in an "uncertain" situation.

Alitalia failed to complete a deal with Air France-KLM after the Franco-Dutch carrier could not agree terms with Alitalia unions over plans to reduce costs and cut jobs.

Alitalia, which is struggling with 1.35bn euros of net debt, made a net loss of 495m euros in 2007. It blamed the loss on the rising cost of fuel, passengers being put off by industrial disputes and competition from low-cost rivals.