A rescue plan for Alitalia remained on hold yesterday as Italy's centre-right government, trade unions and the airline's management struggled to reach agreement over how to provide financial assistance for laid-off workers.

The problem is unlikely to derail the plan, according to those involved, but it requires a solution soon, because Alitalia has warned on several occasions in recent weeks that it is fast running out of cash to pay salaries and continue operations.

Management has agreed with almost all the nine unions representing Alitalia employees that the airline should be divided into two companies and that the workforce should be cut by 3,700, or about one-sixth.

Mr Giancarlo Cimoli, Alitalia's chief executive, is eager to secure approval of the plan so that the airline can draw on a €400 million emergency loan, guaranteed by the Italian government, that will keep it in the skies for another six months.

Alitalia's board of directors yesterday decided to meet on October 6th to review progress.

However, the unions say their acceptance of the job losses is conditional on the provision of adequate financial support for those laid off.

According to Italian Labour Minister Mr Roberto Maroni, the outstanding problem is where the money should come from.

"We don't intend to put more money into Alitalia," Mr Maroni told reporters yesterday.

Alitalia might find it hard to come up with sufficient funds for the laid-off staff because it is already working on an extremely tight budget under the terms of its rescue plan.