Italy opened the bidding process for state-controlled Alitalia yesterday, hoping private investors will succeed in reviving the unprofitable carrier after repeated injections of state aid failed to do so.

Italy has invited offers of interest for at least 30.1 per cent of Alitalia's shares, and as much as the entire Treasury stake of 49.9 per cent, until January 29, 2007, the Treasury said in a statement posted on its Web site (www.mef.gov.it).

In setting the terms of the bidding process, the Treasury said the buyers must keep a stake of at least 30.1 per cent in Alitalia until they met the targets of their industrial plan, as well as maintain the carrier's "national identity".

Under Italian law, a buyer of more than 30 per cent of a company must make a public offer for the rest of the outstanding shares.

"Alitalia must change and that means not tying investors hands, cutting in half the staff, choosing between the two hubs of Milan and Rome, finding an industrial partner for the high growth routes to the Far East," said Claudio Morsenchio, a fund manager at Banco Emiliano Romagnolo in Bologna, Italy.

"It's a challenge. It's a question of being willing to change. Otherwise they'll continue with the strikes and with one flight out of two being late."

Alitalia, which has a market capitalisation of €1.37 billion, has not made an operating profit in the last five years. The last time it posted a net profit was in 2002, and that only after Dutch carrier KLM paid it €200 million to break an alliance.

Since his appointment in 2004, chief executive officer Giancarlo Cimoli repeatedly clashed with the carrier's 10 unions as he cut a fifth of the workforce and split the carrier into two, putting the services and maintenance units into a separate company called AZ Servizi with the aim of selling them. Yet Alitalia remains unprofitable. Due to a legacy of purchasing choices made for political purposes, it operates five different types of aircraft built by as many manufacturers, multiplying maintenance and pilot-training costs.

Also, due to local pressures and political indecision, the carrier continues to operate out of two main hubs, its Rome Fiumicino airport and the Milan Malpensa airport. Most other airlines cut costs by using only one hub.

Alitalia shares soared by as much as five per cent and were trading four per cent higher at €1.029 by 0940 GMT.

"Any news that confirms the sale is positive," a trader in Milan said.

Analysts have speculated on possible bids for the airline by rivals such as Air One and long-time potential suitor Air France KLM, but no leading contenders have emerged so far.

Air France and Alitalia each own a two per cent stake in each other.

Air France could not be immediately reached for comment.

Italian carriers Meridiana and Eurofly declined to comment on whether or not they would bid.