Premier Silvio Berlusconi said Alitalia could be looking into a precipice after rescue consortium CAI withdrew its plan for the failing airline because of union resistance.
''The situation is dramatic and we could be at the edge of a precipice,'' Berlusconi said.
Asked whether CAI's withdrawal meant Alitalia's demise, Berlusconi said ''we'll see, I want to go into the matter in greater depth''.
Alitalia's government-appointed administrator, Augusto Fantozzi, said the airline would keep flying ''as long as it has the money to do so''.
Asked how long that would be, he replied, ''it's hard to say (because of) rising prices and falling passengers''.
The premier and ministers blamed CGIL, Italy's largest and most left-wing union, for encouraging staff to press on with demands.
''It's certain that some parties have to take extremely heavy responsibility for this, especially (union federation) CGIL and the pilots' associations, which we will evaluate,'' Berlusconi said.
The other three federations, CISL, UIL and UGL, also blamed CGIL. CGIL chief Guglielmo Epifani blamed Berlusconi.
Alitalia staff at Fiumicino Airport broke into applause and one member said ''better bankrupt than in the hands of those bandits''.
Welfare Minister Maurizio Sacconi said lay-off procedures would ''probably'' have to start because there was no cash left to pay creditors or buy fuel.
But Shadow Economy Minister Pierluigi Bersani said it was necessary for everyone to ''hold their nerve'' in order to prevent Alitalia going under.
''We aren't at the edge of a precipice; there's still room to avoid failure. It's possible to get the process back on track. I think that by selling the company's non-essential assets the administrator could take the brief time necessary to publish a notice calling for proposals.
''I'm convinced that international players could be available and that their resources would be more useful in this picture than those of Italian entrepreneurs,'' he added.
CAI, which stands for Compagnia Aerea Italiana, withdrew its offer after unions representing the majority of pilots and cabin staff presented counterproposals to CAI's rescue plan.
CAI Chairman Roberto Colaninno on Wednesday told Alitalia's unions they had 24 hours to accept the group's business plan, otherwise CAI would withdraw its offer.
The plan included downsizing the airline's operations, reducing staff and boosting productivity by freezing pay while increasing work hours.
The greatest stumbling block to an agreement with unions was CAI's demand that staff accept a single contract for all employees, as opposed to Alitalia's policy of individual contracts for each category.
In their counterproposal, the unions insisted on separate contacts for pilots, flight attendants and ground staff, while accepting CAI's conditions.
The government in August modified Italy's bankruptcy laws to allow the failing national carrier to be declared insolvent and then split into two with Alitalia's profitable flight operations put up for sale separately.
