MILAN/FRANKFURTMILAN/FRANKFURT (Reuters) - German carrier Lufthansa (LHAG.DE) is ready to invest up to 200 million euros ($223 million) in struggling Italian airline Alitalia [CAITLA.UL], which is running out of cash and racing to find new funds, a source close to the matter said on Thursday.

Confirming reports in two Italian dailies, the source said Lufthansa had written to Italy's industry ministry and rail company Ferrovie dello Stato, which has pledged to take a stake in the airline and which is leading the effort to find new investors.

In its letter, Lufthansa said it was open to putting in fresh funds to Alitalia but questions remain about its priorities. The letter did not contain a precise figure but Lufthansa is ready to stump up between 150 million euros and 200 million, the source said.


"We are not commenting on this," a Lufthansa spokesman said.

Alitalia has struggled for years to be profitable and compete with bigger rivals and has been run by administrators since May 2017 after a previous re-launch attempt failed.

Top executives of Ferrovie will fly to Frankfurt to meet with Lufthansa's managers next week to get clarification about the real intentions of the German carrier regarding Alitalia, three other people close to the matter said.

If Lufthansa confirms its preliminary promise to invest in Alitalia, that could disrupt talks with U.S. carrier Delta (DAL.N), which has said it is prepared to put 100 million euros in the Italian airline.

Italy has been struggling to push through a rescue of its loss-making flagship carrier.

The industry ministry has extended to Nov. 21 a deadline for binding bids after an Oct. 15 deadline passed without an agreement among potential rescuers, which so far comprise state-owned Ferrovie, Delta Air Lines and infrastructure group Atlantia (ATL.MI).


According to financial analysts at Bernstein an investment of Lufthansa in Alitalia would make sense, but not at any price.

"We are worried that getting the deal competing against a Delta bid, will entice Lufthansa to make concessions -- fewer staff cuts, more guarantees towards government or unions -- they should not," Bernstein analysts said in a report.

(Reporting by Stefano Bernabei, Sabina Suzzi and Francesca Landini; Additional reporting by Matthias Inverardi; Editing by David Holmes and Alexandra Hudson)