Italy's government drew fire today after stitching together an emergency bailout for Alitalia that critics said should involve less taxpayer money and more long-term strategy.
The troubled airline's top shareholder Air France-KLM refused to commit to the plan.
Alitalia, which last turned a profit in 2002, needs to secure funding of €500m by Saturday or risk its planes being grounded.
Creditor Eni has threatened to cut fuel supplies unless the airline can show it is a business "we expect to exist six months from now."
After being turned down by several national companies, Rome finally found life-saving funding for Alitalia last night, persuading the state-owned post office to commit to providing €75m via a capital increase while the government provides another €75m in loans.
But the emergency plan relies on existing shareholders giving another €150m between them and the country's banks stumping up €200m in new loans, sources close to the matter told Reuters.
According to other sources with knowledge of the proceedings, this afternoon the government had secured €225m, with a consortium of banks - as yet unnamed - providing €150m alongside the post office's commitment.
Business leaders said the state-funded plan lacked a clear strategy to make the airline a long-term viable business.
The bailout will be presented to Alitalia's board this afternoon. It is regarded as only a stop-gap until Air France-KLM, which owns 25% in Alitalia, can agree a deal with the airline's other investors for it to double its stake.
But the Franco-Dutch carrier, in the middle of its own restructuring, declined to say whether it would participate in the rescue plan, adding it would place tough conditions on giving any help.
The group voted against a cash call when it was first proposed last month. If it does not participate in the capital hike, it risks being overtaken by Italy's post office as the top shareholder.
Air France-KLM chief executive Alexandre de Juniac is open to taking over its Skyteam alliance partner to bolster its access to the Italian travel market, Europe's fourth largest. But approval from his board, which includes the French state and sceptical members of KLM, is less certain.
The support of Alitalia's domestic investors is also in the balance. Its second biggest shareholder, the Riva family, has had its assets seized in a judicial investigation, including its Alitalia's 11% stake.
The airline is currently owned by a disparate group of 21 investors including bank Intesa Sanpaolo and highway operator Atlantia, a consortium pulled together in 2008 by then prime minister Silvio Berlusconi after he rejected a takevoer by Air France.
Cash-strapped Italy is realising it may not be able to hold on to its flag carrier, once a national icon which had its uniforms designed by Armani but now seen as a symbol of the country's economic malaise.
However, with the current loan arrangement, Rome is putting off a politically sensitive sell-out to Air France-KLM, analysts say, even though no other option makes business sense.
At stake is what the Italian government is a strategic national asset, 14,000 jobs, and fears that some of Alitalia's domestic routes - which play an important role because of Italy's patchy rail and road links - could be cut if a foreign buyer took over.
