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Italy Can't Sell Alitalia Through Talks

Monday, 30 Jul 2007 | 7:07 AM ET

Italy cannot hold private talks to sell Alitalia, the economics minister said, as the government struggles to decide what to do with the loss-making carrier.

A seven-month auction to sell Alitalia ended in failure earlier this month, leaving the government with the options to try new ways to sell the airline or liquidate it.

Tommaso Padoa-Schioppa ruled out the possibility of the government holding private talks with investors, in comments Sunday evening in an Alpine resort.

"This the state cannot do. I, as economics minister, cannot to it," he said during a public meeting in Cortina D'Ampezzo. He said the audit courts "would not allow it."

"The judges would begin to investigate why I started negotiating with this buyer instead of that buyer," Padoa-Schioppa said.

The minister already had ruled out liquidating the carrier, saying "there are no judicial or economic grounds to do so."

The Italian government is seeking a private investor to buy at least a 39.9% stake in Alitalia, but is prepared to sell its entire 49.9% stake.

It was forced to call off the auction, however, after all bidders dropped out, with many citing restrictive conditions and shifting guidelines. The bidders included Air One, Italy's second-most traveled carrier, TexasPacific Group , the private equity house, and Russia's OAO Aeroflot Russian Airlines.

Hurt by frequent strikes and competition from low-cost carriers, Alitalia loses between 1 million euros and 2 million euros ($1.4 million and $2.8 million) a day.

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