Nov. 12 (Bloomberg) -- The European Union approved the sale of Alitalia SpA's main assets to a group of Italian investors and ruled a government loan to save the carrier violated limits on state aid.

CAI, a group of 20 investors led by Chairman Roberto Colaninno which bid for the Rome-based carrier's main flight business, won't have to repay a 300 million-euro ($376 million) Italian government loan to Alitalia, which the European Commission, the EU's executive arm, said was illegal aid.

``The loan will have to be returned by the old company by selling its assets at market prices,'' European Transport Commissioner Antonio Tajani said in a Bloomberg Television interview in Italian. ``There won't be any sanctions for Italy. We will monitor that the sale of assets is at market prices.''

CAI, which includes Intesa Sanpaolo SpA and the Benettons' toll-road company Atlantia SpA, submitted a binding offer to rescue Italy's flagship airline Oct. 31. CAI offered 1.1 billion euros ($1.4 billion) and pledged to assume at least 625 million euros of debt. Alitalia was losing $3 million a day when it declared insolvency on Aug. 29 to allow the state-backed rescue plan to begin.

Asset Sales

The investor group plans to merge the airline's flight operations with domestic competitor Air One SpA. Alitalia's bankruptcy administrator Augusto Fantozzi will sell or liquidate other unprofitable assets, including its cargo operations and heavy maintenance units, as well as part of the company's debt of 1.2 billion euros. CAI's binding offer expires on Nov. 30.

The commission's decision follows a similar move in September to allow the sale of parts of Olympic Airlines SA. In both cases, the commission said new investors aren't responsible for paying back illegal state aid as long as they purchase the assets at market price.

``This process will lead to the emergence of a private airline, smaller in size but more efficient,'' Tajani said in the statement. The new company will carry 69 percent of Alitalia's flight capacity, the EU said. A monitoring trustee will be appointed in the next two days to ``ensure that assets are disposed of on market terms,'' it said. Alitalia didn't have an immediate comment, a spokesman said.

The Italian government in April approved the 300 million- euro loan to shore up the airline's finances. In July, the commission said the funding may break EU rules, which prohibited another bailout of the carrier.

The commission probed whether Italy acted in the same way as a ``prudent shareholder'' by pursuing a policy that would lead to likely profitability. Alitalia isn't eligible for subsidies until 2011 because it received state aid in 2001.

To contact the reporters on this story: Matthew Newman in Brussels at Mnewman6@bloomberg.net. Marco Bertacche in Milan at mbertacche@bloomberg.net.

Last Updated: November 12, 2008 09:57 EST