The deal between Etihad Airways Alitalia, finalised in Rome on Friday, gives the Emirati airline access to Europe’s fourth-largest travel market. Etihad Airways is injecting €560 million (Dh2.7 billion) and taking a 49 per cent stake Italy’s debt ridden national carrier Alitalia after 12 months of negotiations.
Etihad is spending €387.5 million on the equity stake, €60 million on buying five London Heathrow slots off Alitalia and a further €112.5 million to acquire 75 per cent of Alitalia’s MileMiglia loyalty programme. The Heathrow slots will be leased back to Alitalia. The transaction is due to be completed on December 31, 2014.
Talks between the two airlines started last year but stalled due to disagreements over restructuring Alitalia’s nearly €1 billion debt and job cuts. Alitalia was bailed out last year by a €500 million government engineered rescue package.
The Italian airline had earlier tried to secure more capital from Air France-KLM, a shareholder, but a disagreement over debt restructuring led to the French-Dutch group allowing its 25 per cent stake to be diluted to 7 per cent.
Etihad has successfully negotiated for more than half a billion euros in debt to be restructured off while foundation shareholders have committed €300 million in equity and Italian institutions extended €300 million in new loan facilities.
Back into the black
Foundation shareholders include Italian government owned Poste Italiane, who is putting up €75 million, and Italy’s two biggest banks San Pailo and UniCredit, who are putting up €88 million and €63.5 million, respectively. Atlantia, IMMSI, Pirelli and Gavo are putting up the rest.
Etihad’s plan to bring Alitalia back into the black includes an overhaul of operations at Italian airports Rome Fiumicino, Milan Malpensa and Milan Linate. Fiumicino will be further developed as an intercontinental hub; an increase in long haul flights at Malpensa and more short haul international services at Linate.
But out of this Abu Dhabi will have three new direct routes operated by Alitalia; Venice, Catania and Bolgonia.
The deal could be met with mixed reactions in Rome. Earlier this week, Italy, one of the world’s largest economies, fell into its third recession since 2008. Etihad’s investment means Alitalia, with a nearly 12,500 strong workforce, will survive but 2000 employees will be sacked.
However, a number of pilots and engineers will be offered positions in Abu Dhabi, while Alitalia chief executive Gabriele Del Torchio, who apologised for the redundancies, said Alitalia is exploring possibilities whether some of its suppliers can take on its soon to be former employees.
But in these same days there is a protest by workers at Fiumicino airport: after the ‘white strike’ had the last few days, they could now abstain from work in mass, presenting medical certificates and paralyzing the airport of the capital. Alitalia announced the “very high risk”.
In the picture: Roberto Colaninno (L), chairman of Italian flag carrier Alitalia and James Hogan (C), president and chief executive of Abu Dhabi airline Etihad Airways, stand next to Alitalia CEO Gabriele del Torchio (R) as he holds an alliance agreement for Etihad to enter Alitalia’s capital, during a press conference in Rome on August 8, 2014. Alitalia has been thrown a financial lifeline by Etihad Airways as the agreement, which follows several months of negotiations, will make the state-controlled Gulf airline the biggest single shareholder in the loss-making Italian carrier.