Etihad Airways in final talks over possible Alitalia stake acquisition

Etihad Airways could buy as much as 40 per cent of Italy’s Alitalia, a Reuters report said. Max Rossi / Reuters

Etihad Airways has entered the final phase of due diligence for a possible investment in Alitalia, the loss-making Italian carrier.

It could represent one of its most significant equity investments in a European carrier to date.

“During the next 30 days both companies and their advisers will determine how a common strategy can be developed which meets the objectives of both parties,” Etihad and Alitalia said in a joint statement.

Etihad said that it will need to work out any obstacles that could stand in the way of a deal.

“Any issues that may prevent the establishment of an appropriate business plan will have to be resolved to ensure the plan can be implemented to move Alitalia to sustainable profitability,” Etihad said.

Etihad did not specify the size of the stake that it was discussing, but Reuters reported it could buy as much as 40 per cent in the Italian carrier.

“Etihad is not a silent or passive investor,” said Will Horton, a senior analyst at the Centre for Aviation (Capa). “Its investment typically brings opportunities but also challenges. Airlines must fundamentally change, which recent years have shown to be a challenge for Alitalia.”

Saj Ahmad, the chief analyst at StrategicAero Research, said that Alitalia is acutely aware of the price it may have to pay for being rescued.

“Alitalia has a substantial European footprint – that would work well for Etihad Regional and Air Berlin if they could work out some sort of pact, codeshare deal or integration on EU connectivity,” he said.

The deal could potentially mean more landing slots for Etihad at London’s Heathrow, Europe’s busiest airport by passenger traffic.

Etihad’s growth strategy has become defined by expanding its route network through “equity alliances”, in which it invests in carriers that help it to expand its global reach.

Etihad owns stakes in Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways and Etihad Regional — formally known as Darwin Airline.

The carrier has gained a reputation for turning around struggling airlines in which it invests, but Alitalia could represent one of its biggest challenges to date.

“Alitalia needs huge capital investment in a narrow and wide body fleet to lower costs and needs to cull staff and overhaul its outdated corporate structure and become a more smaller, but efficient player,” said Mr Ahmad.

Etihad’s aggressive growth plans include adding more than 30 routes by 2020.

This year Etihad will fly to 102 destinations. It is also expecting 20 aircraft deliveries, which will include 787-9 Dreamliners and Airbus A380s.

At November's Dubai Airshow, Etihad announced 199 new orders from Boeing and Airbus.