The United Arab Emirates’ Etihad airlines will buy a 49-per-cent stake in Italy’s lossmaking Alitalia for an undisclosed amount, the two companies said in a joint statement on Wednesday.
“The airlines will now move to finalize the transactional documents, that will include the agreed upon conditions, as soon as possible,” they said.
The deal would reinforce the presence of the Emirates’ fast-expanding airline in Europe, where it already owns minority stakes in Air Berlin, Aer Lingus and Air Serbia. Italian authorities hope it will put an end to Alitalia’s longstanding flirt with bankruptcy.
“It is increasingly clear that this marriage should go ahead,” Italian Transport Minister Maurizio Lupi commented, predicting a bright future for Alitalia thanks to Etihad’s “strong industrial investment.” Two weeks ago, Alitalia chief executive Gabriele Del Torchio said Etihad would invest 560 million euros (760 million dollars). Leaked details from an industrial plan presented to unions on June 11 suggested that Alitalia would be returned to profits by 2017.
But Del Torchio also said over 2,200 jobs, almost a fifth of the total, would have to be slashed as part of the deal — conditions that powerful trade unions have balked at. To sweeten the pill, the Italian government has promised welfare schemes for those laid off.
Another sticking point has been Etihad’s refusal to take on Alitalia’s 1-billion-euro debt mountain. Italian banks that also shareholders - Intesa Sanpaolo and Unicredit - are expected to write off or swap into equity about half of those debts.
Any final deal would have to be approved by EU regulators. In February, Germany carrier Lufthansa urged them to block any rescue of Alitalia involving government-funded airlines such as Etihad, arguing it would amount to state aid, banned by EU rules.
Alitalia, plagued by decades of mismanagement and political meddling in its affairs, has not turned a profit since 2002. In the first nine months of 2013 the Rome-based airline made a pre-tax loss of 162 million euros, after a loss of 119 million euros in the same period of 2012.
Six years ago, Air France-KLM was on the verge of buying it for 2.5 billion euros, but it was blocked by then premier Silvio Berlusconi on the grounds of economic nationalism, in a move that has later proven ill-advised.
The Berlusconi government took on the bulk of Alitalia’s debts and provided subsidies for mass redundancies, offering the remaining part of the business to a consortium of Italian entrepreneurs, who failed to revive the company’s fortunes.