Italy refutes 'protectionist' tag on Alitalia rescue plan

Italy refutes 'protectionist' tag on Alitalia rescue plan

MILAN - Italy has denied charges of protectionism over a plan for the postal service to help fund troubled airline Alitalia but British Airways' parent company IAG condemned it as "illegal aid".

The cash-strapped private flag carrier's board gave an initial go-ahead to a plan on Friday to boost capital by 300 million euros (S$507 million) and take a bank loan of 200 million euros.

Publicly owned Poste Italiane would contribute up to 75 million euros to the capital increase, which comes under a threat that all Alitalia planes could be grounded because of jet fuel debts.

Investors unanimously approved a plan to raise 300 million euros by offering new shares to existing shareholders, according to an e-mailed statement.

The airline's investors, whose biggest is the Air France-KLM Group with a 25 per cent stake, have a month from today to decide whether to buy the new stock, Alitalia said.

Directors offered to resign ahead of possible changes in the carrier's ownership, the company said. "We consider it critical that a capital increase represents a precursor to a successful restructuring," Credit Suisse Group analyst Neil Glynn said in a note to clients on Sunday.

The government said the plan does not preclude a tie-up between Alitalia and Air France-KLM and has asked the group to give its support even though its stake could be reduced to 10-11 per cent.

Board approval allowed Alitalia to keep its regular schedule over the weekend, but sparked heated criticism in Italy over the intervention of a public company in the debt-laden airline.

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