The Italian government yesterday agreed to guarantee a €400 million emergency loan to Alitalia, the national airline on the brink of bankruptcy.

The loan will replenish Alitalia's coffers, which are expected to run out of cash at the end of this month. The European Commission, however, will need to approve the loan and will require Alitalia to present a detailed restructuring plan in order for the loan to pass.

Alitalia had €256 million in cash at the end of March and analysts fear the airline is burning at least €70 million a month.

The loan, which is being organised by investment bank Mediobanca, will have to be reimbursed under a plan being drawn up by Mr Giancarlo Cimoli, the recently installed Alitalia chairman and chief executive. His plan is not expected to be completed before late July, an aide said, while the loan will need to be repaid within 12 months.

This week Alitalia postponed its annual shareholders' meeting from Friday to Monday. The meeting will require shareholders to approve the 2003 results in spite of the decision of Deloitte, Alitalia's auditor, not to sign off on the accounts.

Deloitte expressed reservations over several issues, including Alitalia's decision not to write down the value of its fleet, which has a book value of €3 billion.

Alitalia also sought more time to complete talks with its pilots to guarantee they do not strike during the summer. The airline had hoped to sign an accord on Monday but is now aiming for an agreement today.

Further underlining the difficulty in the airline market, shares in Swiss International Air Lines fell more than 5 per cent yesterday after a profit warning raised concerns about the survival prospects for Switzerland's national flag carrier.

The airline's thinly traded shares closed down 5.3 per cent at 10.65 Swiss francs, in a Swiss market down 0.9 percent.

The loss-making company said late on Monday it would probably not break even at the operating profit level this year. - (Financial Times Service/Reuters)