Italy says talks with EU on Alitalia stalled, new plan needed

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FILE PHOTO: Two workers are seen next to an Alitalia plane at Fiumicino airport in Rome, Italy

ROME (Reuters) -Italian Industry Minister Giancarlo Giorgetti said on Tuesday that negotiations with the European Commission over how to relaunch ailing carrier Alitalia were stalled and the government needed a new plan to keep it in business.

Brussels and Rome have been in talks since the beginning of this year over Italy's plan to restructure the airline through the launch of a new, state-owned company called ITA.

"Alitalia's situation was assessed in the light of the stalled talks with the European Commission," Giorgetti said in a statement after meeting Alitalia's special commissioners.

"We therefore believe need a new plan of action is necessary... to allow the company to keep operating," Giorgetti added, without saying what this plan might be.

Flights to and from Italy have dwindled due to COVID-19, but Rome is hoping for a pick-up in time for the summer tourist season so that ITA can get off to a solid start.

To keep the prospect alive and continue to pay Alitalia staff, the government could push on with the sale of its aircraft and other assets to ITA while it tries to break the stalemate with Brussels, two sources familiar with the matter told Reuters.

The main stumbling block in talks between Rome and Brussels is an EU request that the new ITA company give up a significant number of the slots held by Alitalia at Milan's Linate airport, two other sources told Reuters last week.

Alitalia operated more than 50% of the Linate slots before the coronavirus pandemic hit, and ITA has so far refused to accept a major reduction.

(Reporting by Gavin Jones)