Abu Dhabi's state-owned Etihad Airways said today that it was no longer willing to invest in Alitalia after the Italian carrier's board asked to be put under special administration.
READ: Bailout or bust - Alitalia divides Italians
Alitalia's board took the formal decision today after workers rejected its latest rescue plan last week, making it impossible for the airline to secure funds from shareholders to keep its aircraft flying.
Once under administration, the government will appoint one or several commissioners to assess whether Alitalia can be restructured, either as a standalone company or through a partial or total sale, or should be liquidated.
The board made its decision after meeting shareholders, citing Alitalia's serious economic state, the unwillingness of its investors to refinance the company and the impossibility of finding a quick alternative.
The airline said its flight schedule would remain unchanged.
The company is losing about €1 million a day and without government support risks running out of cash by the middle of May, sources have said. The government has already thrown it a short-term lifeline, a bridging loan of up to €400 million to see it through the bankruptcy process.
Etihad holds back
Without support for restructuring, "we are not prepared to continue to invest," Etihad's president James Hogan said in an emailed statement. "We therefore support the necessary decision of the Alitalia Board to apply for extraordinary administration."
Etihad took a 49 per cent stake in Alitalia in 2014, promising to turn around the troubled airline with a €1.76 billion ($1.92 billion) investment that included other shareholders.
The Maltese government spent months in negotiations with the Italian carrier to sell it a 49 per cent stake in Air Malta, though those talks collapsed earlier this year. Italian unions had made it clear from the outset that Alitalia had no money to invest in the Maltese airline.
No investors
Rival airlines including Lufthansa and Norwegian Air have shown little interest in buying Alitalia and creditors have refused to lend more money, putting more pressure on the government to find a way to save the flag carrier.
The government has ruled out renationalising Alitalia, an airline that was once a symbol of Italy's post-war economic boom but is now struggling to compete at home against low-cost carriers Ryanair and EasyJet.
Outraged at repeated bailouts that have cost taxpayers more than 7 billion euros over a decade, many Italians are urging the government to resist the political temptation to rush to its rescue again.
But with a general election due by May 2018, few Italians believe the ruling Democratic Party (PD) will stand by and watch Alitalia crash and its 12,500 workers lose their jobs.
Former Prime Minister Matteo Renzi, who became PD leader again on Sunday in a primary vote, has said he will have a plan for the airline by mid-May and it should not be broken up.
Alitalia was privatised in 2008 after entering administration earlier that year.