Sources say talks are continuing despite media report claiming the deal between airlines was off
Etihad Airways has toughened its stance on conditions for investing in Italy's struggling Alitalia airline but talks are continuing, sources have said.
"The position of the Arab group has hardened, some problems have been more markedly underlined than before," a source close to the matter said.
But a government source said developments could be overcome. "The government is counting on finding a solution," the source said.
Italian daily Il Messaggero reported on Thursday that a deal between the two airlines was off since the conditions were not in place.
An Etihad spokesperson declined to comment. Alitalia also declined to comment.
"It's part of negotiations... It in no way means the deal is over. They have just put tough conditions on the deal," a United Arab Emirates-based source said.
Etihad has previously said it would invest in the Italian carrier only if it fit in its network and if Alitalia had a credible plan to return to profit.
The Abu Dhabi-based Etihad has been looking at Alitalia's books for a possible investment since the start of the year.
But the prospect of large job cuts at Alitalia and the airline's debt of at least 800 million euros ($1.1 billion) had been major hurdles in the talks.
"Things are a bit stalled mainly because of job-related problems. But there's too much at stake... a solution will be found," another source close to the matter said.
Italy had expected Etihad to present a proposal on its potential investment this week after a meeting between the Etihad CEO and Italian Prime Minister Matteo Renzi on April 10.
Loss-making Alitalia was kept afloat by a government-engineered 500-million-euro rescue package last year. But it needs to find a cash-rich partner quickly to revamp its flight network or else risk having to ground its planes.