Alitalia Waits For Loan or Aeroflot Bid

ROME -- The Italian government called a Cabinet meeting Tuesday to discuss an emergency loan to keep ailing national carrier Alitalia flying after Air France-KLM torpedoed hopes of reviving its takeover plan.

Analysts had considered Air France-KLM as the airline's most viable option to avoid bankruptcy, despite speculation of a rival bid by an Italian consortium or Russian state airline Aeroflot. The carrier has cash left for only a few months.

Air France-KLM's deal to buy Alitalia collapsed earlier this month in the face of union opposition, but the French carrier formally withdrew its offer late Monday -- its strongest signal yet that it has little intention of restarting talks.

That leaves Italian Prime Minister-elect Silvio Berlusconi in the difficult position of finding a new owner for an airline that loses more than a million euros a day and has been barred by the European Commission from receiving further state aid.

Berlusconi has talked of a bid by an Italian consortium and has also suggested talks with Aeroflot after meeting President Vladimir Putin last week, but the airline has sounded cautious.

"Aeroflot treats with understanding an instruction given by President Vladimir Putin," an Aeroflot spokesman said. "We are expecting the Italian side to invite us to talks. However, Aeroflot will be guided [in its decision making] ... purely by pragmatic reasons and interests of investors."

Alitalia's shares were suspended from trade in Milan pending a statement and indicated down nearly 13 percent.