Page last updated at 10:58 GMT, Wednesday, 11 June 2008 11:58 UK

Brussels to study Alitalia loan

Alitalia plane
Alitalia's recent history has resembled something of a soap opera

The European Commission is to investigate an Italian government loan to ailing airline Alitalia amid claims that it violated state aid rules.

Brussels said it would scrutinise the 300m euros ($473m; 239m) payment Alitalia received in April which enabled the airline to keep operating.

Italian ministers said the financial lifeline gave them time to try and find a buyer for the business.

Air France-KLM withdrew a bid in April, throwing Alitalia's future into doubt.

Subsidy row

The airline has since revealed that it urgently needs further funds, in addition to the government loan, to keep on flying.

Spiralling fuel costs are threatening the survival of a host of airlines.

Alitalia's predicament is even more serious since it is saddled with large debts and loyalty to the business has been heavily eroded by years of strikes and the success of more efficient budget competitors.

It made a 495m euro loss last year, on top of a 626m euro loss the previous year.

The EU's Transport Commissioner Antonio Tajani confirmed the inquiry into the loan on Wednesday, saying an "investigative procedure has been opened".

The move follows pressure from rival airlines, such as Ryanair, which have complained that the loan is effectively a state subsidy and distorts competition in the market.

Successive Italian governments have struggled to resolve the airline's problems, with efforts to privatize the business foundering on financial concerns and union opposition.

Prime Minister Silvio Berlusconi wants to keep the airline in Italian ownership with scooter manufacturer Piaggio the latest firm to be linked with a possible rescue deal.

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