BA says passengers will lose out

The Commission said the action appeared to be legal and doubted it could intervene in the dispute.

Alitalia has come under pressure from competing airlines and got an emergency loan from the government last month.

British Airways (BA) has complained to the Commission and the UK government about the Italian authorities' action.

The Italian authorities asked about 40 international carriers not to undercut the national airline on routes outside of the European Union (EU).

But BA said that this means Italian consumers will not benefit from cheaper fares for indirect routes.

For example, if the Italian authorities get their way, someone wanting to travel with Lufthansa via Germany to New York will have to pay the same fare as someone flying direct with Alitalia from Rome to New York.

Legal quandaries

BA is adamant that it can offer low fares from Italy under EU law and the Air Service Agreement between the UK and Italy.

However, the Italian authorities may be able to stop airlines undercutting Alitalia under international bilateral service agreements, some of which are 60 years old.

The confusion appears to exist because the bilateral agreements refer to destinations outside of the EU.

"These agreements concern only long-haul flights. Under the bilateral agreements, airfares should receive approval from the member states concerned and should not undercut the (carrier)," European Commission spokesman Frederic Vincent said.

"We believe it is a bit awkward to have such agreements now that we have the EU internal (aviation) market. But the Commission is not in charge of these agreements," he said.

Alitalia aggression

The Italian action is designed to protect Alitalia from competition on their long-haul routes, a BA statement said.

Aviation analysts share BA's scepticism. "The Italian government is being aggressive in using legislation most people thought was defunct to defend their national carrier in a time of crisis," said Chris Avery, an analyst at JP Morgan.

BA has not received any formal communication from the Commission, a company spokeswoman told BBC News Online.