Fast-growing Etihad Airways took effective control of Italy’s loss-making national carrier Alitalia on Friday, injecting 560 million euros ($750 million) in a deal that will see the Gulf airline gain access to one of Europe’s major markets.
Etihad, which is buying a 49 percent stake in the Rome-based carrier, said Friday it will restructure Alitalia and even laid out the hope of returning it to profitability by 2017. The overall 1.76-billion-euro deal also involves 598 million of debt restructuring and 300 million from Alitalia’s wide array of smaller shareholders.
Etihad Airways CEO James Hogan announced the three-year plan to completely reboot the Alitalia brand at a press conference, saying it was a strong airline but “a poor business financially” that needed to be turned around.
“If we didn’t believe Alitalia could restructure and win, we wouldn’t be here,” he said alongside his Alitalia counterpart, Gabriele Del Torchio.
The two signed the deal making Etihad the single-largest shareholder in Alitalia after months of negotiations over debt restructuring, proposed job cuts and other issues that sparked fierce opposition from Italian unions. Airline workers have staged wildcat strikes at Rome’s main airport this week to protest the deal.
But Alitalia announced earlier Friday that it had reached agreement with all of Italy’s main unions to back the deal.
“This is a great result,” Del Torchio said. “It means that everyone believes in this great adventure.”
Del Torchio acknowledged there would be job cuts, but said employees would be offered work in Abu Dhabi.
The deal adds one of Europe’s most recognizable aviation brands to Etihad’s growing collection of foreign investments that also includes AirBerlin, Air Seychelles, Virgin Australia, Aer Lingus, Air Serbia and Jet Airways.
Etihad is owned by the government of Abu Dhabi, the oil-rich capital of the United Arab Emirates.
Hogan said the renewed airline would be able to capitalize on Etihad’s growing conglomerate to reduce overhead and expand reach. Plans call for beefing up Rome’s Leonardo da Vinci airport as a hub, increasing Alitalia’s wide-body fleet by a third, adding more long-haul routes — especially to the Gulf — and trimming back worse-performing shorter routes.
The aim, he said, was to take advantage of Italy as a tourist and trade destination while giving Italian passengers greater options for travelling abroad.
Alitalia, which reportedly loses nearly 2 million euros a day, has not been publicly traded since it was taken over by a consortium of Italian entrepreneurs five years ago.
The deal, which is subject to regulatory approval, is expected to be completed Dec. 31.