EU Gives Conditional Clearance to Alitalia Restructuring Plan

BRUSSELS, Belgium (AP) -- European Union regulators Tuesday granted conditional clearance to a rescue plan for ailing Italian airline Alitalia SpA.

The government plan involves a 1.2 billion euros ($1.47 billion) recapitalization of Alitalia's flight division, AZ Fly, and the partial sale of its ground operations.

''These recapitalizations do not involve any state aid,'' said EU Transport Commissioner Jacques Barrot.

Under EU rules, Italy needed approval from the European Commission before measures to help the loss-making carrier can be implemented. The EU acts to ensure state aid does not give companies an unfair edge over rivals.

In a statement, Barrot's office said approval of the Alitalia plan was conditional on assurances that ''the state behaves like a prudent investor are strictly complied with.''

A proposed investment of 216 million euros ($265 million) by the public holding company Fintecna in the ground services activities of AZ Services must comply with market conditions.

Alitalia said last week its 2004 losses totaled 812 million euros ($996 million), blaming restructuring charges. It said it expects a lesser loss for 2005.

Sixty-two-percent of Alitalia is owned by the Italian treasury ministry, and its financial woes have worried the government, which is trying to balance the goal of helping the airline rebound with demands of influential Italian unions.

The restructuring plans have also included cutting some 3,700 jobs.

Alitalia has been trying to make itself more attractive so it can win a place in the alliance formed by the merger of Air France and KLM Royal Dutch Airlines.