Alitalia

MILAN (Reuters) - Italy should decide on Alitalia's

future after this month's general election, a union leader said, after the state-controlled airline's sale to Air France-KLM fell apart and it teetered ever closer to bankruptcy.

Luigi Angeletti, general secretary of the UIL, told Canale 5 TV news on Thursday the carrier should not be put under emergency administration and any decisions about its future left until after the vote on April 13-14.

Air France-KLM abandoned talks with unions hostile to the takeover late on Wednesday, although it said it still believed in its takeover plan, which includes 2,100 job cuts.

The UIL union had walked out of talks with Air France-KLM on Monday, saying negotiations before the election were futile.

"Alitalia in chaos", read the headline in Italy's biggest-selling newspaper Corriere della Sera, while La Repubblica's editorial called it "Flagship Suicide".

The airline's board will meet at 1100 GMT. Its chairman Maurizio Prato quit on Wednesday saying the company was cursed.

A cabinet meeting is also expected to discuss developments on Thursday after Economy Minister Tommaso Padoa-Schioppa said the alternative to Air France-KLM was emergency administration.

The future of the airline, in which the state holds 49.9 percent, future has become a key issue in the final stretch of the election campaign, and outgoing Prime Minister Romano Prodi said unions had made a grave mistake in breaking off talks.

Alitalia is losing over 1 million euros a day.

BERLUSCONI

Media magnate and opposition leader Silvio Berlusconi has said he would prefer an Italian buyer and that there was such a group waiting in the wings, though it has not yet emerged.

In an interview with Libero newspaper published on Thursday, Berlusconi said businessmen were lining up to join a bid.

"The problem is ... keeping them out, not keeping them in," he said, adding that interest was very high "because we have touched on the pride of a healthy and competitive flagship."

Berlusconi said Air France-KLM's terms were "unacceptable and offensive."

Alitalia's shares were suspended from trading on Thursday after closing down 5.7 percent at 0.50 euros on Wednesday, giving it a market value of around 735 million euros ($1.15 billion).

Air France-KLM is the world's biggest airline by revenues, dwarfing Alitalia, but its interest in the Italian airline centers on the lucrative route from Rome to the country's financial capital, Milan.

When asked whether he believed Air France-KLM had definitely walked away from its takeover bid, Angeletti replied: "I don't think so."

The Franco-Dutch airline's shares were up 2.12 percent by 0727 GMT compared with a fall of 0.74 percent in the DJ Stoxx travel and leisure index.

Newspapers on Thursday speculated that the government might seek a compromise with unions or search for a way to keep the carrier flying until after the elections.

Alitalia has enough funds to last just about until the end of June, La Repubblica calculated.

Other newspapers looked to a possible return to the bidding of domestic airline Air One, which was snubbed by the government in favor of Air France-KLM, or even German airline Lufthansa, which pulled out of last year's aborted auction