The Italian government will sell about half of its controlling stake in flag carrier Alitalia as part of its efforts to open it up to new owners to help rescue the ailing airline, the Cabinet said yesterday.

The government has a 49.9 per cent stake and would put up for sale about 25 per cent, officials said.

"This will allow Alitalia to search for fresh capital and hopefully relaunch itself. I think it may be the only solution possible," said an analyst who asked not to be named. "Something has to be done, and done quickly."

The office of centre-left Prime Minister Romano Prodi said in a statement the Cabinet decided yesterday "to proceed with the sale of a controlling quota of Alitalia".

Shortly after the news, a Lufthansa spokesman said the German airline currently had no plans for any stake purchases, though this did not refer exclusively to Alitalia.

Speculation regarding Alitalia's future has centred recently on talk of a tie up with Air France KLM, which said last week it was in exploratory, but not formal, talks with the Italian airline about a possible merger.

Air France KLM said shortly after Alitalia shares were suspended yesterday, before the government announcement, that it had no plans to make a statement on the airline.

The shares gained the daily maximum of 10 per cent when trade was renewed and were again suspended.

The government has promised to outline its rescue plan for the loss-making company by January. It said in the statement: "Alitalia cannot do without the entry of capital from new industrial and financial players."

Despite years of losses, forecast to reach more than €200 million this year, Alitalia still evokes nationalist sentiment and is viewed as a strategic asset.

But Alitalia chief executive officer Giancarlo Cimoli said this week there was no point defending its Italian identity. "There is no sense today in protecting the so-called 'Italianness' of the airline. Competition is merciless and the answer can only be the creation of a strong European group," Mr Cimoli wrote in a business newspaper.

The previous centre-right government diluted its majority stake in Alitalia late last year through a €1 billion capital increase, in an effort to meet a European Union request.

The airline has blamed its various woes on a mix of wildcat strikes, high oil prices, deregulation and competition from low-cost carriers, among other things. Alitalia flights were disrupted again yesterday by a transport workers' strike.

Another airline analyst, who did not want to be named, said the stake sale "does not solve any of the underlying problems".

"Alitalia has too many staff, paying them too much, a cost base that's far too high, and is the subject of state ownership and state intervention," said the analyst.

In one sign that there could be resistance to any tie-up diluting Alitalia's "Italianness", the mayors of Rome and Milan jointly wrote a letter to a paper this week calling for Italians to work together to sort out the airline.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.