Etihad Airways aims to finalise Alitalia negotiations by end of month

James Hogan, the president and chief executive of Etihad Airways, says the Italian carrier will need to be the 'right size' before its deal for a 49% stake can be completed.

Giorgio Starace, left, the Italian ambassador to the UAE, with James Hogan, the president and chief executive of Etihad Airways, in Rome yesterday where he discussed the Abu Dhabi carrier’s acquisition of Alitalia. Chris Warde-Jones for The National

Etihad Airways aims to finish negotiations by the end of this month to go ahead with its investment in Alitalia, but the airline needs to be the “right size”.

“We need to right-size the airline [Alitalia] to go forward,” James Hogan, the president and chief executive of Etihad Airways, said in Rome yesterday.

“We are still negotiating and we have a target of the end of this month. Both teams are working in good faith to achieve that. We have a team of executives on the ground here working with our advisers JP Morgan. They are working with Citibank to ensure that they can broker the transaction to win,” he added.

Etihad aims to take a stake of up to 49 per cent in financially ailing Alitalia, after its board of directors had given its backing to the deal last month.

Etihad is demanding downsizing measures and thousands of job losses at the loss-making airline – just as it did when it took equity stakes in Air Serbia and Air Seychelles.

Etihad has gained a reputation for turning around struggling airlines in which it invests, but Alitalia could be the airline’s biggest challenge to date.

Three labour unions were planning a strike on Sunday to protest against the job cuts. But Anpac, one of the labour unions, told The National this week that the strike was put off after successful negotiations with the government.

Other conditions to turn Alitalia’s performance around include cutting loss-making routes, negotiating new employment contracts and reducing airport costs.

Mr Hogan said that Etihad can modernise Alitalia’s fleet, but only once the right changes are made.

“The advantage is that we have over 220 aircraft on our order book,” said Mr Hogan.

“We are the world’s largest operator of the [Boeing] 787s. We have 330 aircraft … We do have the ability as we go forward to use this aircraft in the Alitalia fleet. We have this flexibility.”

But Mr Hogan said the priority is to complete the transaction, stabilise the business, introduce the network changes and grow.

According to reports, Etihad’s initial investment in Alitalia will be €560 million (Dh2.78 billion), with another €660m to be injected in the future.

Asked if Etihad would address the European Commission’s concerns about keeping Alitalia in Italian hands, Mr Hogan said: “Of course, we take 49 per cent and 51 per cent [will be with] Italian investors. The board will reflect that. It’s fundamental … We have to abide by the rules.”

Last week, Etihad announced six new destinations for the first half of next year including Edinburgh and Madrid. It will also fly four times a week to Hong Kong.

Etihad’s growth strategy has relied heavily on expanding its route network through “equity alliances”, in which it invests in carriers that help it to expand its global reach in strategically important regions. Last year Etihad grew its equity alliance to seven, comprising Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways and Etihad Regional – formerly known as Darwin Airline.

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