Shares in Alitalia slumped today amid fears the loss-making airline could go bankrupt if its management, unions and the government failed to agree on a rescue plan at marathon talks.
Shares dived as much as 15 per cent, stung by reports from a union source that chief executive Mr Marco Zanichelli had warned the airline might go into administration if there was no deal on job cuts.
An Alitalia spokeswoman denied Mr Zanichelli had made the comments, however, helping push Alitalia stock slightly higher.
The company's convertible bonds also slumped during morning trade and were suspended limit-down after hitting 54 per cent of their face value. They closed on Monday at 72.72 per cent.
The Italian government began talks with management and unions yesterday, urging the two sides to reach a deal on a restructuring plan before the end of the week after five straight years of operating losses emptied company coffers.
Under its latest plan, management wants to shed 1,100 of the airline's 22,000-strong workforce and outsource a further 2,100 workers to external companies - a plan unions are firmly opposed to.
Newspapers today quoted government sources as saying as many as 7,000 job cuts might be needed to keep Alitalia in the sky.
Alitalia staff walked off the job last week, forcing the company to cancel almost 1,500 flights over five days.
The airline which is 62 per cent-controlled by the Italian government, had chalked up a loss of €200 million to €250 million in the first four months of 2004, leaving it with just €200 million in funds.
The government has said it wants to provide the firm with some financial aid, but its room for manoeuvre is severely limited because of rigid European Union competition rules against state aid.