Nov. 17 (Bloomberg) -- Alitalia SpA, the insolvent Italian airline, is unlikely to be able to pay back a 300 million-euro ($377 million) state loan the European Union has ruled is illegal, the carrier's bankruptcy administrator said.

``It's clear that there won't be enough money'' to pay everyone as the airline is liquidated, Augusto Fantozzi, the administrator, told RAI state television late yesterday. ``Before the 300 million euros from the government, there is 2 billion euros of debt with other creditors.''

The European Commission, the EU's executive arm, ruled on Nov. 12 that the loan, which Italy granted on April 22 to keep Alitalia from running out of cash, constituted illegal aid and must be returned by selling assets. CAI, a group of Italian investors bidding for the Rome-based carrier's main flight business as the state-controlled company is broken up, won't be responsible for the repayment, according to the commission.

CAI submitted a binding offer on Oct. 31 that won the backing of four of nine labor unions, representing a majority of the company's employees. Another five unions, which represent most of the carrier's 7,000 pilots and flight attendants, haven't approved the terms of CAI's plan and some have been staging wildcat strikes this month.

Disruptions Foreseen

The carrier scrapped about 400 flights last week because of a wildcat strike by Alitalia employees based at Rome Fiumicino airport as well as a strict application of work rules by some flight personnel. The airline said Nov. 15 that it would scale back flights this week to reduce disruptions stemming from an increase in employees calling in sick and ``anomalous behavior on operating procedures.''

More than 70 flights were canceled at Fiumicino today, according to airport manager Aeroporti di Roma's Web site, while about 40 flights were dropped at Milan Linate airport.

The five dissident unions said the cancellations shouldn't be blamed on ``worker behavior,'' according to a joint statement on the Web site of Anpac, the carrier's biggest pilots union.

Alitalia is scheduled to start operating as a new company under CAI's ownership in December.

Fantozzi said in the RAI interview that he expects the protest to wind down ``soon,'' while about 12,600 Alitalia workers will receive letters from CAI in the next two days offering them employment under the company's new structure.

``It isn't possible to delay the start past Dec. 1,'' Fantozzi said in the RAI interview.

To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net; Armorel Kenna in Milan at akenna@bloomberg.net.

Last Updated: November 17, 2008 07:02 EST