Alitalia to decide on April 8 on administration

By Jo Winterbottom and Deepa Babington

MILAN/ROME (Reuters) - Alitalia AZPIa.MI bought time on Thursday, postponing to April 8 a key decision on whether to ask for protection from creditors with the government scrambling to keep it flying despite a looming cash crisis.

By that date Alitalia "will evaluate the existence of the necessary conditions to continue doing business," the board said after a seven-hour meeting.

Italy's stock market announced the airline's shares would remain suspended until April 8, when the board next meets.

Alitalia said it remained in favour of a takeover plan by Air France-KLM (AIRF.PA) despite the French carrier's decision to back out of talks on Wednesday saying the demands of Alitalia's unions were unacceptable.

State-controlled Alitalia, whose fate has become a top campaign issue ahead of Italy's general election in 10 days time, has said its cash will run out soon unless a new owner steps in to pump more money into its coffers.

Italy's government said in a statement it would verify if Air France-KLM's decision to back out was final and committed itself to keeping its national carrier in operation.

The European Union has banned further state aid, but the government can put Alitalia under emergency administration, which would allow it to operate with protection from creditors -- roughly similar to U.S. bankruptcy procedures.

Italy's economy minister, who is overseeing the sale, and analysts say that is Alitalia's only alternative to the French deal.