Alitalia Scrambles for Union Deal to Avert Collapse

ROME, Sept 15 (Reuters) - Alitalia's biggest unions clinched an initial deal with the airline's potential buyers on Monday that raised hopes it could avoid collapse, but pilots balked and flights risked being grounded for a lack of cash to buy fuel. Italy's four main unions -- CGIL, CISL, UIL and UGL -- and a consortium offering to buy Alitalia agreed to the rough outline of a rescue plan that would cut about 3,000 jobs but leave 12,500 workers at the slimmed-down airline.

Thousands of others are in units that would be spun off. "It's a first, important step," said Raffaele Bonanni of the CISL union. But it was not clear whether other, smaller unions representing pilots and cabin crews would agree to the deal being negotiated by their peers. They initially scoffed at the agreement and questioned why they were excluded from talks. Negotiations on tricky issues like salary cuts were set to resume at 11 a.m. (0900 GMT), with no guarantee of success.

"The persistent problem which could, if not resolved, cause this initiative to fail is the new job contracts," said Labour Minister Maurizio Sacconi, confirming the figures on job cuts.

The civil aviation authority said at the weekend Alitalia's operating licence was at risk after the airline confirmed it was having trouble buying jet fuel from wary suppliers. The CEO of ENI, Paolo Scaroni, said the Italian oil company would not provide Alitalia fuel without cash up front.

"Not even if Berlusconi or the Pope asks me to," Scaroni told La Repubblica newspaper. "(Eni) cannot supply fuel to airlines if they cannot pay cash. There is no moral suasion -- international agreements are clear."

In Red Since '99

Once a symbol of Italy's post-war boom, Alitalia has for years suffered from political interference, labour disputes, financial woes and most recently from soaring fuel costs -- which are weighing on airlines around the world. The airline, which is operating under a bankruptcy commissioner, has not been in profit since 1999 and had nearly 1.2 billion euros ($1.68 billion) in debt as of July.

An Alitalia collapse would be a huge political blow for Prime Minister Silvio Berlusconi who promised voters he would use his business contacts to find it an Italian buyer. Britain's third largest package holiday operator, XL Leisure Group, grounded all flights on Friday after going into administration. Discount transatlantic carrier Zoom Airlines began bankruptcy proceedings last month.

In April, Alitalia's unions sank a deal agreed under the previous, centre-left, government to sell the airline to Air France-KLM, a deal that Berlusconi, then in opposition, said he would block if he came into power. The state holds a 49.9 percent stake in the airline and its publicly trade shares have been suspended since June.

(Additional reporting by Marie-Louise Gumuchian; Writing by Phil Stewart; Editing by Quentin Bryar) Keywords: ALITALIA/ jlw COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved.

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