Alitalia, creditors working on plan to woo Etihad at key meeting

Sat May 3, 2014 5:23pm EDT
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By Lisa Jucca

MILAN (Reuters) - Alitalia and its creditors are rushing to finalize by Tuesday a proposal aimed at persuading Gulf-based airline Etihad to invest in the loss-making Italian carrier, a source with direct knowledge of the matter told Reuters on Saturday.

One of the options under discussion envisages hiving off a large chunk of Alitalia's 800 million euros ($1.11 billion) of debt into a separate company, a source told Reuters confirming details of an earlier report by Italian daily Il Messaggero.

The plan was discussed at a meeting in Milan on Friday between executives of the loss-making airline and four Italian creditor banks including top Italian lenders UniCredit (CRDI.MI: Quote) and Intesa Sanpaolo (ISP.MI: Quote).

Alitalia Chief Executive Gabriele Del Torchio is flying to the Gulf on Monday and will meet Etihad's boss James Hogan on Tuesday, the source said.

"The aim is to agree by Tuesday on a proposal to be put to Etihad with a view of clinching a deal," the source added.

Alitalia, which was privatized in 2008 under a plan that also involved spinning off unprofitable activities into a "bad" company, has been unable to make a profit ever since and is burning around 1 million euros of cash a day to keep flying.

The airline, which has struggled to compete with low-cost carriers and high-speed trains, came close to bankruptcy in 2013 before being rescued in a government-engineered capital injection.

Under the plan to woo Etihad, Alitalia would be turned into a holding company and would take on the majority of the airline's debt, the source said.   Continued...

Alitalia's logo is seen on top of the headquarters at Fiumicino international airport in Rome October 14, 2013. REUTERS/Max Rossi