Etihad flying high after becoming largest shareholder in Alitalia
Etihad is now the biggest shareholder in Alitalia. (AFP/File)
Brussels on Friday gave the go-ahead for Etihad Airways to become the largest shareholder in lossmaking Alitalia, as part of a €1.7 billion rescue of Italy’s flagship carrier which will see the Gulf carrier step up its expansion in Europe.
“An equity investment in Alitalia will be beneficial not only for both airlines, but, more importantly, it will give more choice and broader travel opportunities to business and leisure travellers into and out of Italy,” said Etihad’s chief executive James Hogan.
Gabriele del Torchio, chief executive of Alitalia, said: “This is an excellent outcome for Alitalia. This investment will provide financial stability and a foundation for impressive long-term growth for the company and for the travel and tourism industry in Italy, in which Alitalia is a fundamental player.
The deal — following talks lasting about a year — is the latest element of Etihad’s plan to build an alliance of carriers that can feed passengers on to its fast-growing fleet of long-haul aircraft. Etihad has now spent well in excess of $1 billion on equity stakes in seven airlines, over a period of two years.
For Alitalia, the deal enables it to avoid the possibility of a second bankruptcy in six years. Alitalia has not reported a full-year net profit since 2002, but is now seeking to generate earnings by 2017. Ferrari’s former long-time chairman Luca di Montezemolo was named as Alitalia chairman.
However, the terms of the deal are contentious as they are likely to involve Alitalia shedding up to 2,000 jobs, or 16 per cent of its workforce — although some staff may now find employment with Etihad or companies connected with the Italian carrier.
Hogan has said he is confident Alitalia could generate profits under a turnround plan.
Abu Dhabi-based Etihad is proposing to pay €387.5 million for a 49 per cent stake in Alitalia, which will be augmented by a €300 million equity injection from the Italian carrier’s other shareholders. It will also pay €112.5 million to acquire a 75 per cent interest in Alitalia Loyalty Spa, which operates MilleMiglia, the airline’s frequent-flyer programme, and a further €60 million for five pairs of slots at London’s Heathrow airport.
In addition, up to €598 million in financial restructuring of short- and medium-term debt has been provided by financial institutions and existing bank shareholders; €300 million of new loan facilities have also been extended by Italian financial institutions.
To secure approval, Etihad and Alitalia had to give up airport slots on the Rome-Belgrade route.
The two carriers said they expected to complete the transaction by the end of the year.
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