After months of negotiations, Etihad Airways and Alitalia announced Wednesday they have agreed to a deal that will see the fast-expanding Abu Dhabi-based carrier take a 49% stake in the struggling Italian flag carrier.
In a brief statement, the two carriers confirmed they had “agreed on the principal terms and conditions of a proposed transaction whereby Etihad Airways will acquire a 49% equity stake in Alitalia. The airlines will now move to finalize the transactional documents, which will include the agreed-upon conditions, as soon as possible. The conclusion of the investment is subject to final regulatory approvals.”
The statement did not detail how much Etihad is paying for the stake, but press reports have talked of a cash injection of as much as €500 million ($680 million). This follows a rescue package, agreed to late last year, which included €300 million from new investors plus €200 million in new lines of credit.
However, with Alitalia continuing to hemorrhage cash, it was widely believed the airline would run out of funding by late summer.
The two airlines have been in talks since late last year, with major areas of negotiation including the number of redundancies required to slim down the business, together with ways of restructuring Alitalia’s existing debts.
Alitalia has been a perennial loss maker, but is regarded by the Italian government as a national entity that must be preserved.
Alitalia’s attraction for Etihad lies in its extensive route network (including extensive routes to South America) that has virtually no overlap with that of Etihad. If the two carriers’ networks are successfully integrated, they would see further traffic flows funneled through Etihad’s Abu Dhabi hub.
The deal marks the most audacious of Etihad’s strategy of acquiring stakes in carriers. Other equity partner airlines include airberlin, Air Seychelles and Virgin Australia.