Etihad Airways PJSC signed a 1.76 billion-euro ($2.4 billion) deal to purchase 49 percent of Alitalia SpA, giving the Gulf company access to one of Europe’s biggest travel markets and providing a lifeline to Italy’s unprofitable former flag-carrier.
Etihad will invest 560 million euros in Alitalia, while existing core investors have approved a 300 million-euro capital increase and Italian financial institutions will supply the same amount in new loans. Some 598 million euros of short- and medium-term debt will also be restructured. The Italian company will seek to become profitable by 2017, said James Hogan, the Abu Dhabi-based company’s chief executive officer.
“Our entry into Alitalia is to be partners,” Hogan said at a press conference in Rome. “There is no quick fix.”
The deal, which caps months of negotiations between the airlines, bank creditors and unions over questions of debt and job cuts, helps secure Alitalia’s future after Air France-KLM (AF) Group bowed out of a bailout brokered by the Italian government last year. The accord forms the biggest in a string of equity stakes purchase by Etihad in carriers spanning Australia to Ireland which have seen the Gulf airline pitch itself as a “rescue investor” for ailing operators.
Etihad’s outlay on Alitalia comprises a 387.5 million-euro payment for the equity stake, 112.5 million euros for a 75 percent interest in the European company’s frequent-flyer program, and 60 million euros for five pairs of scarce take-off and landing slots at London’s Heathrow airport.
The cash means Alitalia will be able to invest in new long-haul routes from Rome and Milan, according to the companies.
“With the right level of capitalization and a strong, strategic business plan, we have confidence the airline can be turned around and repositioned as a premium global airline once again,” said Hogan, who is Australian. “To me, the sexiest airline in Europe should be Alitalia.”
Hogan is pursuing a unique strategy of snapping up minority holdings around the world, building a global network to help feed traffic through Etihad’s hub in Abu Dhabi.
While ownership limits mean Etihad does not have outright control of the carriers, the stakes give it sway to improve management and strategy. At Air Berlin Plc, the German short-haul and leisure carrier trying to overcome losses, Etihad is participating in a financial rescue.
Etihad, which has eight equity partnerships including Alitalia, says the strategy has expanded the wider network to 400 destinations, allowing the youngest of the three major Gulf carriers to compete with Dubai-based Emirates and Qatar Airways.
The Italian purchase will let Hogan tap a major European economy with a large population that’s recently attracted new flights from airlines spanning low-cost operator EasyJet to Emirates, the biggest carrier on international routes.
Several Alitalia unions earlier today reached an agreement with the carrier on a national labor contract that will result in 31 million euros of savings over the last five months of the year. The company didn’t give additional details.
Alitalia CEO Gabriele Del Torchio said the Etihad deal represented an “excellent outcome” for his company that he was “very proud” to have delivered the accord, which is slated to close by the end of the year.-Bloomberg
Follow Arabian Post
Select Arabian Post as your preferred source on Google and MSN News for trusted business news and Arab politics and updates.
