Italy has decided to sort out all legal and financial matters on loss-making Alitalia’s stake sale deal with Etihad by August 8, a senior Italian official says.

The deadline has been fixed as Italy’s national carrier is at risk of bankruptcy, unless it secures capital and a new credit line.

“On August 8, the board of directors of Alitalia is due to meet to discuss a number of issues,” Italy’s Transport Minister Maurizio Lupi said after a board meeting on Friday.

Italy’s government is keen to sell a 49 per cent stake in the Rome-based company to the Abu Dhabi-based airline and conclude talks which have dragged on for more than seven months. The Etihad buy-out is expected to inject much-needed cash into Italian airline, but also give a new life to the carrier, which can be restructured into a profit-making entity in coming years.

“A date has been fixed for signing the deal: August 8,” Lupi said, adding that final details of the deal would be set in stone later this week.

At a meeting on August 8, shareholders will also vote on the capital hike, intended to cover any losses the airline might make before a tie-up is finalised and pay for past liabilities.

The capital raising was one of several conditions submitted by Etihad, which also demanded Alitalia to cut 1,700 of total 14,000 staff, including the cabin crew.

Alitalia’s board on Friday approved a capital hike of up to Euro 300 million, recommending shareholders to raise a previously agreed limit by Euro 50 million, according to media reports.

Italy’s post office said on Thursday it would invest Euro 70 million in Alitalia, via a separate vehicle, which media reports hint would allow it to avoid taking on the company’s debt and other liabilities.

Poste Italiane paid Euro 75 million for a 20 per cent stake last year as part of a government-designed rescue package for the airline which became a political lodestone under former Prime Minister Silvio Berlusconi.

Alitalia failed to compete with low-cost airlines and high-speed trains and made a profit only a few times in its 68-year lifespan.

Chief executive Gabriele Del Torchio said after the meeting that the Italian airline’s most recent proposal to Etihad on issues including how to deal with its Euro 800 million debt pile had been well received by the prospective buyer.

“We have received a response from Etihad. It is positive, but some things still need to be cleared up,” Del Torchio said.

Etihad has never said how much it plans to pay for the stake in Alitalia, but Transport Minister Lupi said in June the Abu Dhabi-based company was prepared to invest up to Euro 1.25 billion over the next four years to buy the stake and revamp the carrier’s fleet.

Photo Credit: Alitalia's very green interiors up close. Tilemahos Efthimiadis / Flickr