Italy’s populist government is heading back to the drawing board as it struggles to find investors for bankrupt airline Alitalia SpA, with U.K. discounter EasyJet Plc close to bowing out of the latest rescue proposal, according to people familiar with the negotiations.

Delta Air Lines Inc. is still on board as part of efforts led by Deputy Premier Luigi Di Maio, who’s struggling to avert liquidation of the Italian carrier — a move that would be damaging for the coalition partners as the European Parliamentary election campaign intensifies.

If the current search for investors fails, the only alternative to liquidating Alitalia may be giving a rescue role to Deutsche Lufthansa AG, according to the people, who declined to be named discussing a confidential matter.

According to an initial plan last month, EasyJet and Delta were lined up to invest as much as 400 million euros ($450 million) in a “new Alitalia” that would emerge after the second bankruptcy process in a decade. In that project, Delta and EasyJet were slated to get as much as 40 percent in the new company, with the rest divided among entities controlled by the Italian government and the Treasury.

EasyJet may not be involved in the latest rescue effort because its goal to break up the airline is opposed by the government, newspaper La Stampa reported Tuesday, citing an unidentified state official. EasyJet is only interested in taking Alitalia’s short-haul flights from Milan’s Linate airport, the people said.

Rail operator Ferrovie dello Stato SpA, which the government chose to lead the rescue plan, is now seeking alternative investors to Easy Jet while continuing talks with Delta, which could get up to 20 percent of the carrier, the people said.

Lufthansa, which hasn’t presented a formal offer, is still interested but its conditions include keeping no more than 60 percent of Alitalia’s workforce, they said.

Representatives at Di Maio’s Economic Development ministry and the Treasury did not respond to requests for comment. An Italian official said negotiations were increasingly heading towards creating a company that would be controlled by the state and semi-public entities such as Ferrovie, with the rest held by Delta and possibly Easyjet.

EasyJet declined to comment on the talks. Lufthansa officials have previously said the company would only buy Alitalia if the carrier undergoes major job cuts while under state control. Delta hasn’t yet made a decision on an investment in Alitalia, Chief Executive Officer Ed Bastian said at a presentation on March 5.

Di Maio said in a Feb. 28 interview that he saw no risk of failure for the talks with EasyJet and Delta, adding the Treasury would take a stake of no more than 15 percent in what he called “a relaunch not a rescue.”

The clock is ticking for Alitalia as it burns through a 900 million-euro state loan. The airline halved its loss before certain items to 154 million euros last year, according to union Uil Trasporti. Still, liquidity at the end of last year fell to about 500 million euros, according to Il Sole 24 Ore.

©2019 Bloomberg L.P.

This article was written by Daniele Lepido and John Follain from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to

Photo Credit: An Alitalia aircraft. Italy’s populist government is heading back to the drawing board as it struggles to find investors for bankrupt airline Alitalia with EasyJet close to bowing out of the latest rescue proposal. Jasper Juinen / Bloomberg