Etihad Airways and Alitalia have finally sealed their partnership, making the financially troubled Italian legacy carrier the eighth airline in Etihad’s Equity Alliance. Under the agreement, Etihad will invest €560 million in Alitalia for a 49 per cent stake. Relaunching and expanding Alitalia’s cargo business to serve the Italian market, Europe’s third largest, is a key part of the Gulf carrier’s strategy, Etihad CEO James Hogan said after signing the deal on 8 August.
“Cargo is an important part of the mix,” said Hogan, at a press conference. “We will put cargo through Malpensa. There are key destinations around the world we can serve.” Alitaila’s Milan hub is set to benefit from the largest investment in cargo activity, via a “centre of excellence,” and other Italian airports will also be upgraded to develop an integrated cargo network.
Italy has been effectively without a home cargo carrier for over two years after Alitalia sharply reduced its cargo business and sold its three remaining MD-11 freighters to focus on passengers as part of a financial restructuring in 2011. Another Italian carrier, Cargoitalia moved in to plug the gap, acquiring the Alitalia freighters and announcing plans to buy five A330 freighters, but it ceased operations only a year later leaving the market wide open for rival European cargo carriers, led by Cargolux and Lufthansa Cargo.
Of Etihad’s total investment, some €112.5 million will be used for acquiring 75 per cent of Alitalia’s frequent flyer programme and €60 million for five pairs of take-off and landing slots at Heathrow – which will be leased back to Altalia. Further equity investments by existing Alitalia shareholders, restructuring of short- and medium-term debt and provision of new loan facilities places the value of the total rescue package at around €1.76 billion.
“The future is secure,” Hogan said, adding: “There’s no quick fix”, a three-year restructuring plan foresees Alitalia posting a €100 million profit by the end of 2017. Alitalia will rebrand within nine months from now, exit loss-making short-haul routes and bring in long-haul links from Rome and Milan to destinations like China via Abu Dhabi. Etihad wants Rome to become a bigger intercontinental hub. Alitalia’s SkyTeam membership will continue, Hogan said.
The new Alitalia brand should convey Italy’s reputation for food, fashion, luxury, culture, history, creativity and innovation, Hogan said: “The sexiest airline in Europe should be Alitalia.”
According to Reuters, Alitalia has agreed 1,635 job cuts with unions, with those staff offered jobs in Abu Dhabi. The deal must now faces the challenge of European Commission approval.