By Giuseppe Fonte and Francesca Landini
ROME (Reuters) - The Italian government is ready to put flagship carrier Alitalia under state control again after 11 years of difficult private management and two failed restructuring attempts.
The loss-making carrier has been run by state-appointed administrators since May 2017 and was looking for new investors to buy it and restructure its business.
A decree allowing the government to set up a new company to take control of the loss-making airline came into force on Tuesday night as part of urgent measures to tackle the crisis triggered by the coronavirus outbreak.
With the decree the government has shelved the planned sale of the carrier at least for the near future, a government source told Reuters.
Elsewhere in Europe, Norway will hold talks with Norwegian Air <NWC.OL> executives on Wednesday after the struggling airline called for financial backing similar to that given to SAS <SAS.ST> by Denmark and Sweden.
Under the decree, Italy earmarked 500 million euros for the whole airline sector in Italy, but government sources told Reuters the bulk of the money will go to Alitalia, which is rapidly running out of cash.
In addition to the 500 million euros, the government could be forced to inject more funds into Alitalia, which was already burning through cash well before the coronavirus crisis.
"The government could end up spending a billion euros more if it wants to shoulder the carrier in the post-coronavirus phase," Andrea Giuricin, Transport economist at Milan Bicocca University, told Reuters.
The decree allows the government to pump money into the new company at later stages if needed.
The International Air Transport Association (IATA) representing the airline industry said $200 billion in government support could be needed worldwide to help the airlines cope with a dramatic fall in activity.
A source with knowledge of the matter said Alitalia was currently operating 100 flights a day, a quarter of its normal activity, due to the virus.
The carrier has currently more than 11,000 employees.
(Writing by Francesca Landini. Editing by Jane Merriman)