Alitalia's unions and an Italian investor group have suspended talks over a bail-out of the flagship carrier, with the unions citing “insurmountable difficulties”.
The unions said they would restart talks, which had carried on late into the night, later today to try to reach an agreement on the rescue plan for the airline whose operations are being overseen by a bankruptcy commissioner.
"We will make a new attempt (on talks) later in the day," they said in a joint statement. Labour Minister Maurizio Sacconi told reporters the state of the talks "makes us fear the worst".
"It is difficult to make forecasts now," he said.
The two sides initially had deadline yesterday to reach an agreement and Mr Sacconi had said it could be extended until early this morning at most.
The unions have been told that employees' contracts will be terminated and the airline shut down if talks fail.
Should talks fail to reach an agreement, the bankruptcy commissioner has threatened to liquidate all the assets.
When asked if the commissioner, Augusto Fantozzi, would start mass layoffs, Mr Sacconi said, "Certainly yes, because he is obliged to do it".
Yesterday protests by airline workers disrupted traffic and led to the cancellation of 50 flights.