The European Commission is to allow the Italian government to invest 1.43bn euros ($1.35bn) in Alitalia, the ailing state-controlled airline.

Alitalia originally announced plans to raise the money last month, via a bond and share issue underwritten by the government, but the deal was dependent on regulatory approval.

European law bans state aid for airlines but the Commission has decided this case is different because in its opinion the Italian government is taking a risk which could easily have been taken by a private company.

Indeed 38% of the investment raised by Alitalia is coming from private companies - Merrill Lynch, Credit Suisse Group and Italy's Banca D'Intermediazione Mobiliare.

The Commission has said it may look at the case again if the private banks pull out of the deal.

Private investors "key"

The EU ban on state aid for airlines stopped Belgium intervening to rescue its flag carrier, Sabena, and ended a rescue plan for Ireland's Aer Lingus last year.

Alec Burnside, a competition law expert at Linklaters in Brussels, told the BBC's World Business Report the inclusion of the private investors in the Alitalia deal is key to the Commission's approval.

"Any other airline which can find private investors willing to come in on the same terms as the government can get that money," he said.

The recapitalisation of Alitalia is part of a wider plan including wage bill and fleet reductions aimed at bringing the company back into profit next year.