Italy's aviation body and Alitalia SpA pilots reassured passengers on Tuesday they were in safe hands, after a warning that a failed rescue deal for the airline would have put pilots under dangerous pressure.

The loss-making national airline has been sticking to its flight schedules despite the prospect of losing its operating licence in a few days, unless the special administrator comes up with a credible new offer or cost-cutting plan by Thursday.

Prime Minister Silvio Berlusconi, who made an election vow to rescue Alitalia, cancelled a trip to New York for the annual U.N. General Assembly to follow the airline's crisis.

Many domestic travellers have little choice but to fly Alitalia. Civil aviation authority ENAC said they had no reason to worry about the pilots, who are blamed by the government for scuttling a rescue bid by Italian consortium CAI last week.

"All operations are currently being carried out regularly and safely," said ENAC chief Vito Riggio.

CAI withdrew its offer after pilots and cabin crew rejected its conditions of 3,250 job losses and slimmed-down contracts.

Comments on Monday from the head of the ANPAC pilots' union, Fabio Berti, about "psychological pressure" on crews from such contracts, and consequences for safety, sparked some concern.

But Berti said on Tuesday: "I never said Alitalia pilots are stressed and that passengers should be afraid because of this."

"Despite the grave situation Alitalia pilots are maintaining normal operations and maximum standards of safety," said Berti, adding that he had been talking about "hypothetical" contracts that "don't take into account crews' fatigue and stress levels".

Riggio said he had taken the extra precaution of sending two ENAC flight inspectors to "check the state of the pilots".

TOO LATE

One free-market think tank, the Bruno Leoni Institute, said that although Alitalia's bankruptcy "would be painful" and mean thousands of job losses, it would be "the best solution for the company, consumers and taxpayers" as it had become a burden.

In a final attempt at finding a buyer, government-appointed administrator Augusto Fantozzi published in the press an invitation for offers for all or part of Alitalia by Sept. 30,

His attempts at arousing interest from foreign airlines like Air France, Lufthansa and British Airways appear to have come to nothing so far.

Alitalia has not made a profit since 1999 and its workforce of 19,000 is highly-unionised and notorious for striking.

A tender for the state's 49.9 percent stake by the previous centre-left government attracted 11 bidders who all pulled out.

A second attempt led to Air France-KLM being picked as buyer but the deal met opposition from unions and Berlusconi, who was campaigning for office and said Alitalia must stay Italian.

"There's no offer and in fact there is not even the CAI offer any more," said Transport Minister Altero Matteoli.

The media mogul returned to power in May and rallied local investors behind CAI's rescue bid, withdrawn last Thursday. The government rules out more state aid or renationalising Alitalia.

Berlusconi's spokesman Paolo Bonaiuti did not expect a last-minute reprieve for the CAI offer, saying that "even if (unions) changed their minds now, it would be difficult to bring the Italian business consortium back to the table".

As fears grow about Alitalia's ability to pay for fuel and supplies, the first report of its assets being seized came from Israel, where local media said the airports authority had asked a court to seize Alitalia bank accounts over a $500,000 debt.