Italy risked failure in its latest attempt to bail out bankrupt airline Alitalia, after two companies involved in the rescue got cold feet, raising the prospect of at least a temporary nationalization of the carrier.

State rail operator Ferrovie dello Stato Italiane SpA, or FS, said Wednesday that conditions aren’t in place to form a group to save the airline from liquidation. That followed a similar statement from the Benetton family’s Atlantia SpA. A third potential partner, Deutsche Lufthansa AG, isn’t ready to commit equity, FS said.

The prospect of a failed agreement comes just ahead of a Thursday deadline for a binding investment plan. The Rome-based government set the timetable in a bid to resolve a decade-long headache and save jobs at the carrier, which has been estimated to lose about 700,000 euros ($789,000) a day and hasn’t posted a profit for at least 15 years.

The Rome-based company is also burning through a 900 million-euro state loan while seeking to compete in a market where fares are falling and consolidation has left it dwarfed by rivals. The government is readying 350 million euros in bridge financing to keep Alitalia flying in the meantime.

Biggest Carrier

While U.S.-based Delta Air Lines Inc. had been seen as the most likely foreign partner, Lufthansa, Europe’s biggest airline, entered talks last month to invest in Alitalia. The company on Wednesday reiterated its interest, though the German carrier’s plan would involve significant job cuts and a reduction in flights.

Italy’s Economic Development Minister Stefano Patuanelli told CNBC in an interview Wednesday that Alitalia “needs a turnaround that takes into account workers and their jobs.” The minister said earlier that March of next year remains the final deadline to close a deal for the carrier.

Lufthansa’s patchy M&A record has investors wary of it embarking on another shopping spree, adding pressure on Chief Executive Officer Carsten Spohr to get the Italian government to meet his demands. Lufthansa has struggled to integrate Air Berlin into its Eurowings group, leading to deep losses earlier this year.

Lufthansa wants Alitalia transformed into a profitable new company before making an equity investment, according to people familiar with the matter. Company executives also want Italy’s government to handle negotiations with unions, they said.

Italy could temporarily nationalize Alitalia if no adequate offer materializes, daily la Repubblica reported on Tuesday. A nationalization could run for 12 months, allowing the government to manage redundancies before control passes to group including a foreign partner. As a last recourse, the company’s administrators could also allow Alitalia to fail and liquidate its assets to pay off debts.

State-appointed administrators have been running Alitalia since 2017 after former shareholder Etihad Airways pulled the plug on funding and workers rejected a 2 billion-euro recapitalization plan including 1,600 job cuts from a workforce of 12,500.

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This article was written by Chiara Albanese, Tommaso Ebhardt and William Wilkes from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Photo Credit: Alitalia aircraft. Potential investors in the airline are getting cold feet. Alessia Pierdmenico / Bloomberg