Airlines: Train Takes the Strain As Stricken Alitalia Cancels Flights in Wake of Aborted Rescue

Italians scrambled yesterday for railway tickets as the country's flag-carrier, Alitalia, teetered on the brink of collapse after a consortium committed to its relaunch withdrew its offer on Thursday.

With much of his personal and political credibility tied up in the company's survival, the prime minister, Silvio Berlusconi, was under immense pressure to come up with an alternative plan. But his finance minister ruled out renationalisation and the bankruptcy commissioner appointed to run the company last month said he had sounded out other European airlines without finding a possible buyer.

Liquidation could allow them to buy the airline for less and, perhaps more importantly, impose "take-it-or-leave-it" conditions on the trade unions and professional associations that refused to sign up to the latest rescue attempt.

Talks were grounded over the investors' demand for 1,000 redundancies among the pilots, and labor organizations claimed that the deal did not, despite comments to the contrary from the consortium and government, guarantee existing salary levels. Some 30 Alitalia flights were canceled for "technical reasons" that the company said had nothing to do with its financial crisis. Italy's national railway service reported a flood of bookings and laid on extra trains between Milan and Rome.

A further drop in ticket sales will aggravate Alitalia's cash position although, according to Italian media, this may be less critical than its bankruptcy commissioner, Augusto Fantozzi, had signaled. Last weekend, he warned that he could not guarantee flights beyond Monday because fuel suppliers were refusing credit.

The most likely executioner of Alitalia appeared to be the chairman of Italy's civil aviation authority, Vito Riggio. The airline is flying on a provisional license and Riggio told the financial daily MF that, without a credible rescue plan, he could not renew it beyond October 2.

"The first requirement that a company must have, in order to keep its aviation license, is to show that it has enough liquidity for at least three months," Riggio was quoted as saying.

British Airways said it was not "in any way" interested in buying even a minority share in Alitalia. Iberia also denied any interest. Lufthansa had nothing to say, while Air France-KLM said it had no comment "for the moment".

Up to 100,000 travelers could be left with worthless tickets if the Italian airline goes into liquidation. An estimated 1m bookings would become meaningless, while domestic travel could be seriously disrupted for months.

Yesterday's scheduled cabinet meeting discussed the affair. Afterwards, however, Berlusconi's right-hand man, the junior minister Gianni Letta, said there was no alternative to the offer tabled by the consortium that pulled out this week.

There have been rumors that the Milan-based Mediobanca might be orchestrating a new bail-out. Asked to confirm or deny the stories, the investment bank's managing director, Alberto Nagel, replied cryptically: "This being a delicate and problematic situation, silence is golden."