The Italian government has agreed to convert a EUR300 million euro (USD$473 million) emergency loan to Alitalia into an asset on the ailing carrier's books, in a surprise move to win auditor approval for the airline's precarious finances.
Economy Minister Giulio Tremonti said the new government had adopted the move at a cabinet meeting in Naples, but called it a temporary measure. Alitalia has said it urgently needs a capital increase to keep flying.
"It's a temporary measure so that the internal auditors don't bring up questions," Tremonti told reporters.
Alitalia's finances have deteriorated sharply in recent months as passenger bookings fall, debt rises and costs spiral higher on the back of rising oil prices.
The airline, which is flying dangerously close to bankruptcy after a planned sale to Air France-KLM fell apart, reported a wider quarterly loss last week and Italian media say auditor Deloitte & Touche may not sign off on its 2007 accounts.
The airline's board met on Wednesday and Alitalia said in a statement it had named an interim human resources head ahead of Monday's board meeting to approve the full-year accounts.
The accounting move by the government is likely to invite further scrutiny from the European Commission, which is already looking into whether the EUR300 million emergency loan violated EU rules barring further state aid.
A European Commission spokesman declined to comment. Tremonti said he would notify the Commission on the government move on Wednesday itself, calling it a "manageable procedure".
The EU transport commissioner is in charge of overseeing Italy's attempts to rescue Alitalia, and the job was given to Antonio Tajani, a close ally of Prime Minister Silvio Berlusconi, earlier this month.
Berlusconi has promised to find a consortium of Italian businessmen to rescue Alitalia, but such a group has yet to emerge.
