Etihad-Alitalia talks heat up after meeting with Renzi

ROME (Reuters) - Etihad Airways is expected to present a letter of intent for its potential investment in loss-making airline Alitalia within the next few days after negotiations gained traction following a meeting with Italy's premier, a source close to the matter said.

Alitalia was kept afloat by a government-engineered 500 million euro (414 million pounds) rescue package last year but needs to find a cash-rich partner quickly to revamp its flight network or else risk having to ground its planes.

Etihad is considering investing up to 500 million euros in Alitalia, the source said on Friday. Out of that, 350 million would be for a 49 percent stake in the troubled airline.

Some of the conditions put forward by the Abu Dhabi-based airline include 2,000 job cuts, half of which on a permanent basis, with the other 1,000 workers to be put on state-backed temporary layoff schemes. Alitalia has a workforce of 14,000 people.

Etihad is also asking Alitalia's creditors, which include Intesa Sanpaolo < and UniCredit , to restructure 400 million euros of the airline's debt.

(Reporting by Giselda Vagnoni, writing by Agnieszka Flak)