Alitalia faces key union talks as rescue takes off

By Jo Winterbottom

MILAN (Reuters) - Alitalia's unions will hold talks with the government on Monday on a rescue plan for the airline and on job losses -- which a minister said could be under 5,000 -- after it sought bankruptcy protection on Friday.

Alitalia's long-awaited move comes after nearly two years of hunting for a buyer and sets it up for rebirth as a smaller airline alleviated from the baggage of debt and high labour costs.

A group of 16 Italian investors led by turnaround expert Roberto Colaninno is expected to confirm its interest to the administrator Augusto Fantozzi sometime this week in assets of Alitalia to be split off, such as planes and slots, newspapers said this weekend.

And British Airways (BAY.L) could be interested along with Air France-KLM (AIRF.PA) and Lufthansa (LHAG.DE), La Repubblica newspaper said on Sunday, just over a week after an industry source said the carrier would not consider a partnership with Alitalia.

On Sunday, British Airways said it did not comment on speculation.

The Italian investors could offer 300 million to 350 million euros for the Alitalia assets which would form the core of a revitalized airline, as part of an investment which could total 1 billion euros.

The government of Prime Minister Silvio Berlusconi amended bankruptcy law and antitrust regulations on Thursday to facilitate the rescue plan to create a new Alitalia.

The new carrier will dominate the key domestic route between Milan and Rome as it absorbs competitor Air One, owned by one of the Italian investors, Carlo Toto.