Etihad sets out plan to return Alitalia to profitability by 2017

Etihad Airways and Alitalia have agreed the terms that will help to return the Italian carrier to profitability by 2017. 

Speaking in Rome today, Etihad’s president and CEO James Hogan said the investment was a major move for the carrier and it “made sense” for the Abu Dhabi-based carrier to invest in the Italian airline to bridge business between the UAE and Italy.

More than EUR1.758 billion has been announced to revitalise the airline across the next three years, with EUR300m to come from current shareholders and EUR560m to come from Etihad.

Etihad’s contribution will include EUR387.5m for its 49% stake, while it will look to spend EUR60m in acquiring five pairs of arrival/departure slots at Heathrow. The UAE carrier has also taken a 75% stake in the MilleMiglia loyalty programme for EUR112.5m.

Around EUR598m in debt has been written-off  while EUR300m in new loan facilities has been agreed.

Hogan said: “Etihad has a track record in investing and building successful businesses and our entry into Alitalia has no exit strategy. We are a partner indefinitely and there is no quick fix.”

Under-performing short-haul routes will be dropped or cut under the plans, which will see Alitalia launch more long-haul routes.

Further codeshare agreements will also take place, and Hogan added SkyTeam, of which Alitalia is a member, will remain a ‘key pillar’ for the Italian carrier.

Rome will remain a focus as well as Malpensa and other Italian cities, some of which will be linked to Abu Dhabi in the future.

Plans are also underway to reinvent the brand in the first quarter of 2015.

“We can keen to build the brand. Alitalia is going nowhere and we are focused and committed to promote the sexiest, great service and a profitable airline as we move forward and most importantly, an ambassador for Italy,” Hogan added.

The agreement now awaits approval from the European Commission.

Gabriele Del Torchio, CEO of Alitalia, said: “This is an excellent outcome for Alitalia. We have had to take some tough decisions in a very robust negotiation process but we have achieved the consensus we require to create the right shape and size for Alitalia in the future. This investment will provide financial stability and enable us to position Alitalia, and the travel and tourism industry in Italy, for long-term growth.”

Etihad has been investing heavily in Europe to create its own ‘alliance’, including investment in Aer Lingus, airberlin, Darwin Airlines (which became Etihad Regional) and Air Serbia.