* Deadline for 300 mln euro cash call subscription Wednesday
* Political interference keeps possible partners away
* State bailouts don't make Alitalia sustainable in long-term
* Air France-KLM seen as best partner to save Alitalia
MILAN, Nov 27 (Reuters) - In 2008, Maurizio Prato, then chairman of Alitalia, said only an "exorcist" could save the Italian airline. Five years later, the near-bankrupt carrier is still waiting for a miracle worker other than Italy's ill-suited political establishments.
By Thursday, Alitalia will learn how many shareholders have subscribed to a 300 million euro ($407 million) capital increase that is part of a wider government-led rescue plan.
Whatever the result, the cash call is only a temporary reprieve and the airline needs ten times that much to compete successfully in the global airline market, analysts said.
Alitalia has made a profit only a few times in its 67-year history and with 700,000 euros in losses a day and net debt of 800 million euros, it could soon have to ground its planes for lack of cash.
Alitalia - the airline that flew the first pope ever to travel by plane - is by many accounts the victim of chronic political interference that has long stifled attempts to make the euro-zone's third-largest economy a strong market one.
Before privatisation in 2008, various governments disbursed four billion euros in cash to Alitalia, rarely requiring strong industrial strategies in return. The government's latest rescue brought in the state postal service as an investor - Rome says it will put Alitalia on stronger financial footing before it negotiates a deal with a potential foreign partner.
"The real problem is getting past the politics. Alitalia is not a national treasure anymore, it's a national disgrace and it has been for years," said airline industry analyst James Halstead, managing partner at UK-based Aviation Strategy.
"One of the reasons politicians will not get people investing in Alitalia easily is because 1/8the politicians 3/8 are interfering."
To be sure, Alitalia is sitting on some attractive assets: Europe's fourth-largest travel market, 24 million passengers and competitive airport slots that allow travellers to fly back and forth to Italian cities at convenient times of the day.
That's why Air France-KLM, Alitalia's longtime fiance, has not yet abandoned hopes for an eventual tie-up.
The Franco-Dutch group has remained an Alitalia shareholder with 25 percent since 2009. However, this month it decided against participating in Alitalia's cash call and let its stake be diluted. It said its SkyTeam alliance partner was strategically important, but not at any cost.
"There needs to be a vigorous industrial restructuring of Alitalia and a significant financial overhaul. We don't have the means to spend money carelessly," Air France-KLM Chief Executive Alexandre de Juniac has said.
Various European majors have flirted with Alitalia, but backed off in the end: KLM withdrew in 2000 after the state backtracked on their plans to shut Milan's second airport, thus making KLM's idea of a north-Italian hub unsustainable.
Other serious suitors included the merged Air France-KLM, Germany's Lufthansa, British Airways and Swissair, but all in the end retreated, partially because of an inability to negotiate a deal on purely commercial terms.
The state is jealously guarding heavily unionised Alitalia and its 14,000 workers, branding it a national strategic asset.
Rome believes Italy needs a national airline to ensure its mountainous and stretched geography is well served, and former Prime Minister Silvio Berlusconi won the 2008 election promising to keep the airline in Italian hands.
But it was Berlusconi's ideology and insurmountable union opposition that lead Air France-KLM to drop its bid in 2008.
"If you don't fix the issue with the unions, we refuse to get our hands dirty," then-CEO of Air France-KLM Jean-Cyril Spinetta said at the time.
Italian media and social networks are flooded with messages from ordinary Italians urging the state to let Alitalia compete on the same terms as its rivals or allow it to fail as happened to other airlines in Europe, including well respected Swissair.
"There is this misguided ideology that Italy needs a flag carrier; then there are vested union and other interests that want to maintain the status quo," said Carlo Stagnaro, the head of research at think-tank Bruno Leoni Institute. "If Alitalia cannot stand on its own feet, it should be allowed to fail."
Alitalia inherited decades of wasteful spending and bad management decisions, which left it focused on the domestic and regional markets, vulnerable to competition from low-cost carriers and from high-speed trains on the Milan-Rome route.
Since 2009, Alitalia's domestic capacity dropped 1.5 percent, based on the number of seats available and distance flown, while that of Ryanair grew nearly 60 percent, according to November data from aviation database Innovata.
Its modest 5 percent growth on long-haul routes from Italy was far outstripped by Gulf carriers Emirates and Qatar Airways whose capacity in that segment more than doubled since 2009, although from a lower base.
Alitalia lacks a viable hub, with the Fiumicino airport in Rome overstretched and operating below industry standards, and whose expansion could only happen in a decade's time.
Far from Italy's business centre in the country's north, the hub also fails to capture the lucrative premium clientele.
Analysts say up to a fifth of the airline would need to go to make it competitive.
"Alitalia has an interesting European base of traffic which is inevitably interesting for Air France-KLM," said Damian Brewer, analyst at RBC Capital Markets. "If you cut off some unprofitable routes, then you are left with a decent business."
However, any such cuts could be fatal to an already fragile government of Enrico Letta, facing primaries in a few weeks.
Today's Alitalia is much leaner than the group that was rescued and privatised in 2008: it has a younger fleet, its cost base is better than that of Air France, and long gone are perks it enjoyed such as picking pilots and staff at home.
Management is refocusing the airline's strategy on the more lucrative long-haul routes, it has promised severe cost cuts and is said to be mulling laying off a fifth off its staff.
But Air France-KLM wants more assurance on debt and that it will have more say in Alitalia's strategy if it invests again or even chooses to return next year with a full takeover bid.
It can easily afford to sit back and wait until Alitalia - and ultimately Italy - are forced to negotiate at its own terms, with other potential suitors few and far between.
"The last thing Air France-KLM wants is to take on Alitalia in its current form and without full ability to decide what to do," Halstead said. "If Alitalia was treated as a company that could manage its own affairs, then Air France-KLM would want to be involved."