Italian media reports earlier said merger talks with Lufthansa had stalled after Italian authorities refused Lufthansa's suggestions to adjust the price for a 41% stake in Alitalia successor ITA Airways.
Italy's former national carrier Alitalia has started procedures for the collective dismissal of its remaining 2,059 employees, the airline's administrators have told unions.
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The move comes as the successor to bankrupt Alitalia, ITA Airways faces hurdles in its merger plans with German Lufthansa.
According to Italian media reports, merger talks stalled after the Italian Economy Ministry refused Lufthansa's suggestions to adjust the price for a 41% stake in ITA Airways.
Lufthansa looking to negotiate further
Lufthansa is arguing that the government-owned Italian airline would lose value due to its poor performance in the fourth quarter of the year.
Lufthansa said it would adhere to the 2023 terms of the contract for its investment in ITA, adding it "had signed the necessary remedy package by the agreed deadline".
Meanwhile, Alitalia, which is under special administration measures and moving toward final liquidation, plans to lay off its remaining employees until the end of the year.
The final cuts include more than 1,100 flight attendants and 82 pilots and become effective in January, according to a letter sent this past week by the administration to the airline unions.