Etihad finally signs for 49% of Italy’s Alitalia

Etihad Airways has secured a 49 per cent share in Italy's Alitalia airline.

ROME // Etihad Airways has taken a 49 per cent share in troubled Italian national airline Alitalia, it announced late yesterday.

The Abu Dhabi carrier ended 12 months of negotiations in a deal worth more than €1.75 billion (Dh8.62bn), which aims to bring Alitalia back to profit by 2017.

Sticking points had included redundancies, cutting routes and negotiating new contracts.

“We believe in Alitalia,” James Hogan, chief executive of Etihad, said in Rome yesterday. “It is a great brand with enormous potential.

“With the right level of capitalisation and a strong, strategic business plan, we have confidence the airline can be … repositioned as a premium global airline again.”

Italy’s unions yesterday agreed to the deal, which will lead to the loss of 2,000 jobs but some staff will be re-employed in Abu Dhabi.

“This means they believe in Alitalia’s future,” said chief executive Gabriele Del Torchio. “Sometimes painful decisions are necessary but we do it to create a future.”

Etihad has gained a reputation for investing in and turning around struggling airlines to expand its reach into key regions.

Last year it increased its alliance to seven – Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways and Etihad Regional, formerly known as Darwin Airline.

But Alitalia could be the biggest test to its strategy. It has lost millions since it was privatised in 2009 and, despite the Italian government trying to bail it out with a €500m handout, was losing €1.5m a day with debts of €1bn.

Alitalia approached Etihad last year after its major shareholders Air France and KLM refused to provide more capital and reduced their holding to 7 per cent from 20 per cent.

“Market conditions have changed, internationalisation has become overwhelming and so it became clear to us that the only way to tackle the future for shareholders who invested in it, and Italy, was to find an international alliance,” Mr Del Torchia said.

Etihad has committed to pay €387.5m for the 49 per cent stake in Alitalia, €60m for five slots at London’s Heathrow Airport and €112.5m for 75 per cent of Alitalia’s Millemiglia loyalty programme.

The rest of the deal includes €300m from core Alitalia shareholders, €598m through debt restructuring and another €300m in new loans from Italian banks.

“Alitalia is the perfect ambassador for Italy and all that it represents,” said Mr Hogan.

“As we revitalise the brand, the airline will increasingly embody all that we recognise as quintessentially Italian – the history, culture, food and fashion. It must be an airline of which Italians can be proud.

“However, ultimately it has to work as a business and the goal is for sustainable profitability from 2017.”

Alitalia and Etihad Airways were last month named the official global airlines for Expo 2015 in Milan.