The Treasury said on Tuesday that under the right conditions it may sell its full 49.9% stake in national carrier Alitalia.
Until now the Treasury had said it would retain no more than 10% of the airline.
However, in a letter to the three remaining bidders for Alitalia, the Economy Ministry explained it would sell the 10% should such a request come from the future buyer as part of their proposed business plan.
The Milan stock exchange welcomed the prospect of the state selling its full stake and Alitalia's shares shot up by almost 1% in a matter of minutes.
However, the Treasury's announcement drew immediate criticism from several trade unions.
UIL union leader Luigi Angeletti said it would be best if the Treasury maintained a stake in Alitalia "at least for a couple of years".
"This is not interference with management decisions, but wanting to be in a position of being informed of business strategies which could conflict with the national interest," he added.
Opposition to the sale also came from the small UGL union which has accused the Treasury of trying to unload the carrier at a cut-rate price.
CONDITIONS SET FOR FORMAL BIDS.
Tuesday's letter from the Treasury set down the guidelines and conditions for presenting formal, binding bids for a majority state in Alitalia.
The three remaining bidders are: Aeroflot Russian Airlines, together with Italy's biggest bank UniCredit: the private equity funds Matlin Patterson and Texas Pacific Group (TGP); and AP Holding led by Carlo Toto, chairman of Italy's second-biggest airline AirOne.
In its letter, the Treasury said it was not opposed to bidders being joined by other, minority partners and that these must be indicated in the formal bid.
The bids must be presented to the Treasury by July 2 and bidders will be given access to company records starting May 24.
The Treasury said it will evaluate the three business plans using a points system and precise parameters which include proposals for restoring the airline's financial health, maintaining slots, modernising the fleet, guaranteeing employment levels, future investment and deadlines for completing the business plan.
In the event that the bids are too similar, the Treasury said the bidders would be asked to revise their offers.
The Italian government decided to sell a majority stake in Alitalia at the end of last year and last week confirmed that while the privatization was behind schedule it would be completed by the end of July.
The carrier has not posted an operating profit since 1998 and accumulated losses of 380 million euros last year, almost twice the amount it had predicted.
Its net debt currently stands at more than 1.1 billion euros.
Alitalia on Tuesday was thrown into chaos by the latest strike by its cabin staff and a nationwide air traffic controllers' strike.
