Italian airline Alitalia is to seek bankruptcy protection as it tries to agree a deal to ensure its survival, its financial adviser has confirmed.
The carrier will seek court protection from its creditors to enable it to continue operating while it undergoes a radical restructuring.
Plans are being drawn up to split the carrier into two and to sell a stake in a new entity to a foreign airline.
It was reported earlier that a number of foreign firms are competing for a stake in Alitalia.
German airline Lufthansa has joined Air France-KLM in seeking a minority share in Alitalia when it is relaunched under a plan unveiled this week.
Italy's Prime Minister Silvio Berlusconi said yesterday that under the rescue plan the company will remain Italian, as he had promised at polls in April. He fought Air France-KLM's earlier bids to win control of the airline.
'The management of Alitalia will remain in the hands of Italians,' Mr Berlusconi told reporters after the government approved the rescue plan.
Under the plan, the new company will take on the airline's still profitable operations while another will take over the rest and its debt. It is thought up to 7,000 people could lose their jobs.
Alitalia, in which the state has a 49.9% stake, has been surviving on a loan of €300m made in late April from public funds after the collapse of takeover talks with Air France-KLM.
Alitalia is now some €400m in the red, according to an estimate by the Bruno Leoni research institute.
'No one can buy Alitalia in the state it's in,' Roberto Colaninno, head of scooter maker Piaggio told La Repubblica.
'With all respect, I am not Merlin the magician. The business is toast. It doesn't exist any more. There's nothing left.'
The company's board is expected to approve the rescue plan at a meeting today.
