NEW YORK--Alitalia SpA on Monday said its future as an independent airline is at stake, ahead of a crucial board meeting Thursday when the ailing Italian flag carrier will discuss raising fresh financing.

The chief executive of the privately held Alitalia said the airline has to decide whether to keep flying alone or become part of a bigger airline group as it tries to improve its profitability.

"The market is consolidating and I think there is a case for Alitalia to move into a larger group," Andrea Ragnetti said at an event in New York.

The latest troubles at Alitalia, which is 25%-owned by Air France-KLM (AF.FR), came as high fuel prices and Europe's lingering economic problems have laid low many of the region's national airlines.

Air France is in the middle of big reorganization of its own domestic business. Similar shake-ups involving the elimination of thousands of jobs and the renegotiations of labor contracts are underway at the European operations of Deutsche Lufthansa AG (LHA.XE), Nordic carrier SAS AB (SAS.SK) and Iberia, the Spanish airline owned by British Airways parent International Consolidated Airlines Group SA (IAG.LN, IAG.MC).

All the airlines are struggling to run profitable short-haul and medium-haul networks that compete with leaner discount carriers such as Ryanair Holdings PLC (RYA.LN, RYA.DB) and feed traffic to their long-distance flights.

"Alitalia will have to find its way in the next couple of years," Mr. Ragnetti said, adding that Alitalia's future was in the hands of its shareholders. Air France-KLM, the Franco-Dutch airlines operator, is Alitalia's biggest single shareholder. The rest of the register is made up of some of Italy's best-known financial institutions, investors and industrial companies which mounted a 1.1 billion euro rescue of the carrier in 2008. These investors include banking group Intesa Sanpaolo SpA (ISP.MI) and tire-maker Pirelli & C.S. SpA (PC.MI).

Mr. Ragnetti highlighted in a speech Monday that the U.S. airline industry has stabilized after a series of mergers significantly reduced the number of players in the market, and the European market has lagged behind in consolidating.

Italian newspapers have been rife recently with reports about Alitalia's dwindling finances. The airline has a fleet of 142 aircraft. It reported net profit of EUR27 million on a 4% rise in revenue of EUR1.13 billion in the three months to end-September after losses in the previous two quarters. But net debt rose to EUR923 million from EUR862 million three months earlier.

Mr. Ragnetti decline to comment on the state of the airline's finances or its immediate course of action. "The options are many," he said in an interview.

Mr. Ragnetti said the airline's focus was to try to increase revenue rather than to cut costs.

"[Alitalia already had] one of the most competitive cost structures in Europe," he said. "The key will be to grow revenue and keep that cost structure unchanged."

Alitalia had had a good fourth quarter, he said, adding that he hoped the numbers would show it breaking even. "The company has shown to be much more resilient to the economic crisis."

Air France-KLM declined to comment but referred to earlier remarks by Air France CEO Alexandre de Juniac who said the airline didn't have the means to consider increasing its stake in Alitalia. The French-Dutch airline bought a 25% stake in Alitalia for EUR323 million three years ago. Since last month, when a lock-up period expired, Air France-KLM has an option to buy additional shares in Alitalia.

--Gilles Castonguay in Milan and David Pearson in Paris contributed to this article.

Write to Matthew Walter at matthew.walter@dowjones.com.

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