Etihad to Acquire 49% Stake in Alitalia

11.08.2014 Aviation & Space
Etihad to Acquire 49% Stake in Alitalia

Etihad to Acquire 49% Stake in Alitalia

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Abu Dhabi-based Etihad Airways will buy 49% of Alitalia and pour 560 million euros ($751 million) into the loss-making Italian flag carrier in a turnaround effort that will involve heavy job losses, under a deal signed on Friday.

The two airlines have been in talks for eight months and a final agreement was held up by tough negotiations over thousands of job cuts and an Alitalia debt restructuring demanded by Etihad Airways as a condition for the deal.

“After much effort, a year of work and many late nights, we did it,” Alitalia CEO Gabriele Del Torchio said after the signing of the deal attended by Alitalia Chairman Roberto Colaninno (left) and Etihad Chief Executive James Hogan (photo)

In addition to Etihad's 560 million euro investment, Alitalia shareholders will stump up 300 million euros via a capital increase approved earlier on Friday.

Alitalia's creditor banks have agreed to an additional 300 million euros in new loan facilities and up to 598 million will be released by restructuring Alitalia's debts, valuing the total deal signed on Friday at 1.76 billion euros.

Alitalia has made an annual profit only a few times in its 68-year history and received numerous state hand-outs before being privatized in 2008. It was kept afloat by a government-engineered, 500-million-euro rescue package last year.

Without a deal with cash-rich Etihad, its planes may have been grounded.

A marriage with Etihad could bring Alitalia money to invest in more profitable long-haul routes and make it less reliant on domestic and regional services where it has struggled to compete against low-cost airlines and high-speed trains.

Etihad's Hogan said Alitalia, which offers access to Europe's fourth-largest travel market and flies 25 million passengers a year, was a good fit for his airline.

“There are no more exciting destinations in Europe than Italy,” Hogan said, adding he would seek to remake the Alitalia brand. “To me, the sexiest airline in Europe is Alitalia.”

However, Hogan said Alitalia was a financially poor business and it would take time to turn it around. To meet that target, Etihad plans to turn Rome's Fiumicino airport into an intercontinental hub, boost connections from Milan and improve its cargo business, Hogan said.

Etihad already has stakes in Air Berlin and Aer Lingus and the latest deal will boost its efforts to expand in Europe.

Source: Reuters

 



 
 

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