UPDATE 1-Alitalia unions urge Italy's government to abandon EU talks over revamp

(Adds EU Commission’s comments)

MILAN, April 13 (Reuters) - Alitalia trade union representatives on Tuesday urged Italy’s government to abandon negotiations with Brussels over the airline’s revamp, saying the European Commission is favouring foreign carriers over the group.

Rome has been in negotiations with the European Union’s executive arm for months over Italy’s plan to restructure the airline through the launch of a new, state-owned company called ITA.

Speaking before the Italian parliament, the head of the UILT trade union Claudio Tarlazzi rejected the idea that the new company could accept any of the EU’s proposals for the restructuring.

“We must realise that the EU is favouring rival companies, and negotiations (with Brussels) must be stopped and the company created with all the necessary assets,” Tarlazzi told the members of two parliamentary committees holding a joint hearing.

Criticism over the EU’s handling of Alitalia peaked last week, when Brussels approved France’s contribution to a 4 billion euro ($4.8 billion) support package for Air France-KLM in return for a 4% reduction in its take-off and landing slots at Paris-Orly airport.

A Commission spokeswoman said looser rules for state aid adopted during the pandemic through the EU’s “temporary framework” could not be applied to Alitalia.

“Alitalia has been persistently loss-making and was in difficulty already at the end of 2019, before the COVID-19 outbreak, and thus it is excluded from... receiving aid on the basis of the temporary framework”, the spokeswoman told Reuters.

“By contrast, Air France and Lufthansa were not in difficulty at the end of 2019, which is why they could be recapitalised.”

The Commission is in contact with the Italian authorities, she added, without elaborating.

The EU has asked for ITA to drop the Alitalia brand, give up as many as half of its slots at Milan city airport, and start without the handling and maintenance divisions of the old carrier, sources have said.

ITA’s management had planned to seek partnerships with rival carriers using the negotiating power of Alitalia’s Milan-Linate airport slots as a sweetener.

It had been supposed to buy some of assets of the old Alitalia using part of 3 billion euros injected by the government, and to start flying with less than 50 jets in June.

Representatives of three other trade unions attending the hearing agreed with Tarlazzi and said ITA should start with double the planned fleet.

Alitalia has posted an operating loss every year since 2012, and more than half of its 11,000 employees have been put under temporary layoff scheme because of the coronavirus crisis.

$1 = 0.8409 euros Additional reporting by Foo Yun Chee in Brussels; Editing by Jan Harvey