Etihad Airways promises to restructure Alitalia

Abu Dhabi-based airline buys 49 per cent stake in Italy's loss-making national carrier.

Fast-growing Gulf airline Etihad Airways is to inject 560 million euros ($750 million) into Italy’s loss-making national carrier Alitalia, in a move that will see it gain access to one of Europe’s major markets.

Etihad, which is buying a 49 per cent stake in the Rome-based carrier, said on Friday it will restructure Alitalia and even laid out the hope of returning it to profitability by 2017.

Etihad Airways CEO James Hogan announced the three-year plan to completely reboot the Alitalia brand at a Press conference at a Rome hotel, saying it was a strong airline but “a poor business financially” that needed to be turned around.

“If we didn’t believe Alitalia could restructure and win we wouldn’t be here,” he said alongside his Alitalia counterpart, Gabriele Del Torchio. “The sexiest airline in Europe should be Alitalia.”

The two signed the deal after months of negotiations over debt restructuring, proposed job cuts and other issues that sparked fierce opposition from Italian unions. Airline workers have staged wildcat strikes at Rome’s main airport this week to protest the deal.

The deal adds one of Europe’s most recognisable aviation brands to Etihad’s growing collection of foreign investments that also includes AirBerlin, Air Seychelles, Virgin Australia, Aer Lingus, Air Serbia and Jet Airways.

Hogan said the new airline would be able to capitalise on Etihad’s growing conglomerate to reduce overhead and expand reach. Plans call for beefing up Rome’s Leonardo da Vinci airport as a hub, adding more long-haul routes and trimming back less-performing shorter routes.

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‘Etihad set to invest €1.25bn in Alitalia’

Abu Dhabi-based Etihad Airways is prepared to invest up to €1.25 billion in Alitalia over the next four years under a possible tie-up between the two carriers, Italian Transport Minister Maurizio Lupi said.

Of that, €560 million would be used to buy new shares in the Italian airline and the rest would be invested in planes, design and training, Lupi told reporters in Rome.

Italy’s flagship carrier Alitalia, which received a €500 million government-engineered rescue package last year, risks running out of cash by August unless it can find a cash-rich partner.

A trade union source said Lupi told a meeting of Italian union representatives on Wednesday he hoped the long-awaited deal with Etihad would be completed by July 15.

Alitalia chief executive Gabriele Del Torchio said last week he was confident an agreement would be reached in a few weeks.

Rome-based Alitalia, once a national icon whose staff wore uniforms designed by Giorgio Armani, is now a symbol of economic malaise in a country struggling to emerge from recession.

The airline, which employs 14,000 people, would have to cut jobs to meet conditions set by Etihad, which already has stakes in Air Berlin and Aer Lingus.

Lupi said the two sides had discussed possible lay-offs of 2,251 Alitalia staff as a condition for Etihad’s investment, broadly in line with previous reports.

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2,200 jobs could be cut due to the Etihad Airways alliance

The head of Alitalia expects around 2,200 jobs to go under a planned tie-up with Gulf carrier Etihad Airways, he was quoted as saying by La Repubblica newspaper on Sunday.

"Etihad is inflexible on this (job cuts)," Gabriele Del Torchio was quoted as saying.

Alitalia and Etihad have been in talks since December, but a deal has so far proved elusive due to Italy's reluctance to bow to Etihad's demands for job cuts and a restructuring of the Italian airline's debt.

Italy's Labour Minister Giuliano Poletti said last week job cuts could be as high as 2,500 and Alitalia management is due to meet trade unions on Thursday.

La Repubblica reported Del Torchio as saying Etihad had asked the creditor banks to write off 30 percent of the airline's debt and convert the rest into equity.

"I don't think there are big problems on the horizon on this one," he was quoted as saying.

Etihad still needs to secure an agreement with Alitalia's creditors led by Italy's two biggest banks, Intesa Sanpaolo and UniCredit, on how to restructure around 700 million euros ($953 million) of debt.

Italian media over the weekend reported UniCredit's chief executive Federico Ghizzoni as saying Etihad's requests were hard to meet but he was confident a deal could be reached.

Del Torchio said in a separate interview in Il Messaggero on Sunday that he hoped a preliminary "document" for a deal with Etihad could be drawn up at an Alitalia board meeting on Friday.

Asked when a final deal might be reached he said: "In July, I hope, with the signing of the contract."

Del Torchio said Alitalia's current controlling shareholder group CAI would hold a stake of 51-55 percent in the new Alitalia created after the deal. Etihad would have 45-49 percent.

All pending legal cases involving the Italian airline would end up in an "Old Alitalia" vehicle, he said.

With Alitalia expected to run out of cash by August, sources familiar with the matter have said the company, the Italian government and unions have little choice but to accept a deal on Etihad's terms.

($1=0.7345 euros)

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Etihad closer to buying almost half of Alitalia

The prospect of Etihad Airways buying nearly half of Alitalia has significantly increased after a meeting between Etihad's boss and Italy's prime minister, and disagreements over job cuts may be overcome, said a source with knowledge of the talks. Loss-making Alitalia was kept afloat by a government-engineered 500 million euro ($694 million) rescue package last year. But it needs to find a cash-rich partner quickly to revamp its flight network or else risk having to ground its planes.

Abu Dhabi-based Etihad has been looking at Alitalia's books for a possible investment since the start of the year. But the prospect of large job cuts at Alitalia and the airline's debt of at least 800 million euros had been major hurdles in the talks. The source with knowledge of the talks between Etihad CEO James Hogan and Prime Minister Matteo Renzi late on Thursday at the premier's office said Etihad was considering investing up to 500 million euros in Alitalia and was inching towards an offer.

Out of that investment, 350 million would be for a 49 percent stake in the Italian airline, the source added.

"The letter of intent (from Etihad) will arrive within a few days," the source told Reuters on Friday. "Etihad is not coming in to patch things up but to change the whole face of Alitalia which will become a five-star airline."

One of the conditions put forward by the Gulf airline is for 2,000 job cuts out of Alitalia's 14,000-strong workforce, the source said. This is much lower than cuts of up to 7,000 staff reported in the Italian press. The source said the Italian government believed Etihad's demands on the jobs front were not insurmountable.

Alitalia has called a board meeting for Monday at which Etihad's proposals are likely to be discussed, another source close to the situation said. Etihad and Alitalia both declined to comment.

GLOBAL REACH

Formerly state-owned carrier Alitalia was privatised in 2008, but Rome considers the firm strategically important to ensure Italy has sufficient domestic transport connections, and because it is a large employer.

A marriage with Etihad could bring Alitalia the money it needs to invest in a new strategy, focused on long-haul routes, after it has been struggling to compete against low-cost airlines and high-speed trains on domestic and regional routes.

A stake in Alitalia, which offers access to Europe's fourth-largest travel market and flies 25 million passengers a year, would further Etihad's efforts to expand its global reach through strategic holdings in other airlines. Etihad has refused to negotiate with Italy's unions, which have stalled talks between Alitalia and other foreign bidders in the past.

The Gulf carrier wants the issue of job cuts settled before negotiations enter the final phase, several sources with knowledge of the matter have said.

Etihad wants to lay-off 1,000 Alitalia workers on a permanent basis, while the remaining 1,000 could be put on temporary layoff schemes partially supported by the state, the first source with knowledge of the Renzi talks said.

Etihad is also asking Alitalia's creditors, which include leading Italian banks Intesa Sanpaolo and UniCredit , to restructure 400 million euros of debt, the source said. Intesa and UniCredit are also significant shareholders.

Sources close to the creditors have said that one of the options on the table envisaged postponing the deadline for debt repayments or a debt to equity conversion.

Disagreement over debt scuppered an attempt to tie up with Air France-KLM , formerly Alitalia's top shareholder, last year.

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Alitalia-Etihad deal to close this week, minister says

A deal between struggling Italian carrier Alitalia and Abu Dhabi-based Etihad Airways should go through this week, Italian Transport Minister Maurizio Lupi told the Lower House on Wednesday. "I think this week, as announced, the work carried out in the past few months will reach a conclusion," he said. Lupi said last week that Etihad would shortly decide whether to buy a stake in Alitalia. Talks are ongoing over whether the Gulf carrier, which is vying to broaden its network in Europe, could buy up to 40% in the troubled Italian airline. 

In early February, Etihad and Alitalia issued a joint statement saying they were in the "final phase" of negotiations for a deal that would see the Abu Dhabi carrier buy as much as a 40% stake in its Italian counterpart, the equivalent of a much-needed capital injection of 350 million euros. But the arrangement, as well as other plans to bring Alitalia back to profitability, have been controversial.

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Etihad Airways reportedly will raise its share in Airberlin to 49.9%, could it be merged with Alitalia?

Ailing German airline Air Berlin, almost 30 percent owned by Abu Dhabi-based Etihad Airways, will be delisted and Etihad will raise its stake to 49.9 percent, a German weekly reported, possibly as a prelude to combining it with Alitalia. Citing company sources, WirtschaftsWoche magazine said a group of German shareholders, among them former and current company executives, would raise their stakes to hold more than 50 percent between them, preserving the carrier's German status.

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Alitalia to launch Zagreb and Pristina service

Alitalia has confirmed it will launch services to both Zagreb and Pristina this year as the Italian carrier looks to put greater emphasis on the Eastern European and Balkan markets. “The Balkans and Eastern Europe play an increasingly important and strategic role in the Alitalia Group’s new industrial plan”, the airline said in a statement.

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Etihad CEO gives 50-50 chance for Alitalia deal

Etihad Airways' talks on investing in struggling Italian carrier Alitalia could swing either way and hinge on terms laid down by the Abu Dhabi-based airline, Etihad's chief executive said on Monday.

Talks between the airlines intensified last month and sources close to the matter said Etihad might be interested in buying a stake of up to 40 percent in the Italian carrier.

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