Etihad and Alitalia tie-up deal enters home straight

Sun Feb 2, 2014 1:13pm EST
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By Stanley Carvalho

ABU DHABI (Reuters) - Etihad Airways and Alitalia are in the final phase of due diligence for a possible investment by the Abu Dhabi carrier in the troubled Italian airline, the companies said on Sunday.

Italian Prime Minister Enrico Letta, in Abu Dhabi on a visit to encourage investment in Italy, said he had high hopes for a deal and is "flexible" over the possibility of a change in Alitalia's management.

Alitalia and Etihad have been in talks for weeks on a possible investment by the Gulf carrier, which sources close to the matter say could involve Etihad buying a 40 percent stake for as much as 300 million euros ($404.6 million).

"I am very happy with the announcement; we have worked for this outcome," Letta told reporters, though he declined to comment on the size of Etihad's investment.

The two companies and their advisers will determine a common strategy that meets the objectives of both parties in the next 30 days as they seek to move Alitalia to sustained profitability, the joint Alitalia and Etihad statement said.

Alitalia offers access to Europe's fourth-largest travel market and flies 25 million passengers a year, but it had net debt of more than 800 million euros at the end of last year and is losing 700,000 euros a day.

A tie-up with the Gulf carrier, however, could bring a vital source of liquidity and the resources to invest in a new strategy focused on long-haul routes.

Letta, whose fragile coalition government engineered a 500 million euro emergency rescue to keep Alitalia flying while it searched for partners, has much at stake politically in the effort to save Italy's historic flag carrier.   Continued...

An Alitalia plane is parked on the tarmac at Fiumicino international airport in Rome December 10, 2013. REUTERS/Max Rossi