Etihad moves toward Alitalia investment

June 02, 2014 - 6:47:24 am

DUBAI: Etihad Airways said it had set the terms for investing in loss-making airline Alitalia and was looking to conclude the deal, as the Abu Dhabi carrier expands its reach in Europe.

Both airlines will proceed with final documentation to complete the transaction once the board and stakeholders in Alitalia confirm acceptance of the terms, it was announced in a joint statement yesterday.

Etihad, which already has stakes in Air Berlin and Aer Lingus, could invest more than €500m in exchange for a 49 percent stake in the Rome-based airline. No details of the terms of deal or size of investment was provided in the statement.

Italian Transport Minister Maurizio Lupi told state television that Etihad was ready to invest around €600m in Alitalia. He also said the deal would not entail creation of a separate company to hive off its bad debts.

Etihad has been looking at the possibility of an investment in Alitalia since the start of the year. But the prospect of large job cuts at Alitalia as well as its debt of at least €800m have been major hurdles in the talks. One source said an agreement had been reached that would involve reducing Alitalia’s payroll by as many as 2,800-2,900 jobs, at least part of which may be covered by a state-sponsored layoff scheme.

Major job cuts are likely to stir opposition from Italy’s unions. The deal included a compromise over Etihad’s request for a high-speed rail line to the Fiumicino airport in Rome after Italy said it could not be done quickly. Reuters

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