MILAN: Emirates airline Etihad Airways tied up a deal to rescue debt-laden carrier Alitalia yesterday by taking 49 percent of the Italian company. The two groups gave no details of the value of the deal or of any conditions, but two key issues are debt of about €1bn ($1.36bn) and overstaffing at Alitalia.
The government has warned that this is the last chance for Alitalia which has lurched from crisis to crisis for years.
A stake of 49 percent means that Alitalia retains its advantageous status as an European airline. The deal, concluding tough negotiations which began at the end of last year, means that Etihad Airways is in effect rescuing Alitalia, playing a role which Air France once considered but then dropped because of the scale of the problems.
Alitalia, rescued several times over several years, is again in dire straits.
If it had gone bankrupt, the fall of this high-profile name would have had a severe financial and psychological impact on Italy which is struggling to climb out of a deep recession lasting more than two years.
The agreement also marks a big step in the rise of Etihad Airways as a young and rapidly growing company.
It now becomes a key shareholder in one of the old names of European aviation, and increases its reach into European markets and global routes.
Italian Transport Minister Maurizio Lupi said: “It’s increasingly clear that this marriage must be tied up because it is now obvious to everyone that it amounts to a big industrial investment with concrete chances of development for our company.”
Etihad has insisted that the debt be restructured. Alitalia is now in the hands of private shareholders, but has its roots in the days when most European countries had their own state-owned airlines. The debt and staff cuts are believed to have been central sticking points in the negotiations, but the breakthrough came late on Tuesday at a meeting between banks and shareholders.
Alitalia employs 12,800 and it is believed that about 2,200 jobs will have to be axed. Etihad Airways has expanded rapidly in recent years, largely on a rise of air travel in the Gulf region of the Middle East.
In a joint statement, the two airlines said they had agreed the “terms and conditions of a proposed transaction whereby Etihad Airways will acquire a 49 percent equity stake in Alitalia.”
They said they would tie up the deal as soon as possible subject to approval from regulators.
The chief executive at Alitalia, Gabriele del Torchio, said early in June that Alitalia would have to face a “complex, exhausting and painful” restructuring, but that there was “no alternative”.
And he mentioned 2,200 job cuts.
Lupi, in a warning on Monday to Italian trade unions which are strongly opposed to job cuts, said that Alitalia had but two options: “the plan for recovery with Etihad, or the abyss.”