The flag carrier has suffered losses in 11 of the last 12 years

Shares in the struggling state-owned airline were suspended earlier in the day pending the announcement.

The loan was announced at the end of a cabinet meeting at Prime Minister Silvio Berlusconi's office in Rome.

Deputy Transport Minister Mario Tassone did not reveal the size of the loan to the flagship airline.

Reports by Italian news agencies, ANSA and AGI said it would be in the region of 500m euros, $605m.

The loan is the only type allowed under European Union rules.

Rescue plans

Loss-making Alitalia, which is 62% state-owned, received a government-backed bridging loan, thought to be about 400m euros, in May.

It replaced both its chairman and chief executive under pressure from its militant unions, who then gave their support for a rescue plan.

But its auditors, Deloitte & Touche, signalled the airline's future was far from secure by refusing to sign off its accounts.

The airline must improve its financial health if it is to join an alliance formed by the merger of Air France and KLM Royal Dutch Airlines.

Alitalia's survival, say analysts, could depend on joining that alliance.

Swiss stalls

And a profits warning from another struggling European carrier, Swiss International Air Lines, has sent its shares diving.

In a statement on Monday night, Swiss said "the steep rise in fuel costs since the beginning of the year" and the absence of cost concessions from its maintenance partner had forced it to adjust its earnings objective for 2004.

"Current projections suggest that the company's business performance for the year could fall short of a breakeven operating result," it said.

It said it could incur extra unplanned costs of 85m Swiss francs "if the price of kerosene remains at its current level of $360 per tonne".

Swiss said it was taking "appropriate action" to stay as close as possible to breakeven, though it gave no further details.

Board member Andre Kudelski has decided to stand down due to a divergence of views on the consequences of entry into the British Airways-led One World alliance, Swiss said.

Swiss shocked investors when it withdrew from a planned alliance with BA and One World earlier this year.