Etihad Airways acquires 49% stake in Alitalia

Etihad Airways, the flag carrier of the United Arab Emirates (UAE), has signed an agreement under which it will invest Euro 560 million in the Euro 1.7 billion-worth recapitalization plan of the Italian national airline Alitalia to acquire 48 percent equity.
The initial agreement, signed here Thursday afternoon by Etihad President and CEO James Hogan, and Alitalia's CEO Gabriele Del Torchio, is a culmination of nine month talks between the two sides; it still needs the approval of the Italian government and the European Commission to take effect on December 31, 2014. Etihad's investment will be provided through a combination of equity injections, asset purchases and other financing facilities and funding arrangements to re-structure the airline's balance sheet, according to UAE news agency (WAM).
Other core shareholders in Alitalia will cover the remaining cost of the airline's strategic plan with Intesa San Paolo providing Euro 88 million, Poste Italiane - Euro 75 million, UniCredit - Euro 63.5 million, Atlantia - Euro 51 million), IMMSI - Euro 10 million, Pirelli - Euro 10 million and Gavio - Euro 2.5 million.
Additionally, up to Euro 598 million in financial restructuring of short and medium term debt has been provided by financial institutions and existing bank shareholders.
Euro 300 million of new loan facilities have also been extended by Italian financial institutions.
Etihad Airways will take a 49 per cent shareholding in Alitalia, for an investment of Euro 387.5 million. Its total investment also includes Euro112.5 million to acquire a 75 per cent interest in Alitalia Loyalty Spa, which operates MilleMiglia, the airline's frequent flier program, and the purchase by Etihad Airways of five pairs of slots at London's Heathrow Airport valued at Euro60 million. Completion of the equity investment remains subject to completion by Alitalia and its key private and public stakeholders of certain conditions precedent and is also subject to final regulatory approvals, according to the report.
Welcoming the deal in a joint press conference with Del Torchio, Hogan said: "For Etihad Airways, this is a strategic, long-term commercial investment." "On completion, we are committed, with the other shareholders, to build a reinvigorated Alitalia as a competitive, sustainable and profitable business that can operate successfully in the global air travel market.
"We believe in Alitalia. It is great brand with enormous potential. With the right level of capitalization and a strong, strategic business plan, we have confidence the airline can be turned around and repositioned as a premium global airline once again," he pointed out.
"Alitalia is the perfect ambassador for Italy and all that it represents. As we revitalise the brand, the airline will increasingly embody all that we recognise as quintessentially Italian - the history, culture, food and fashion. It must be an airline of which Italians can be proud.
"However, ultimately it has to work as a business and the goal is for sustainable profitability from 2017," Hogan went on.
"Alitalia can succeed and it can grow again but it needs to build from solid foundations. We have made it clear from the start that our entire investment should be focused on supporting the implementation of the new business plan, which will see this goal come to fruition.
"The winners from this successful strategy will be Italian and international travelers, who will see better service, new routes and greater competitive choice; Alitalia's employees, who can look forward to a brighter future over the long term, in a business which will grow again; and the Italian people, who can be proud once again of their national airline.
On his part, Gabriele Del Torchio said: "There is a long road ahead, first to complete the transaction and then to deliver this new vision. Today marks a critical step on that journey and we are proud to take our place as a strategic investor in the new Alitalia." "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," he noted.
"This investment will provide financial stability and enable us to position Alitalia, and the travel and tourism industry in Italy, for long-term growth.
"And for this important result I'd like to thank all the Alitalia staff - men and women, managers and workers, pilots, crew and office staff - who have worked with passion and commitment for our new launch," Alitalia's CEO stated.
"The transition to a sustainable and profitable Alitalia has required tough decisions but we all share the conviction that this new beginning, oriented towards growth, will bring new opportunities for everyone," he added The comprehensive business plan provides for the revitalization of Alitalia's brand, to embody all the things for which Italy is renowned - food, fashion, culture and lifestyle - in a 'Made in Italy' premium service concept and guest experience.
This will be accompanied by the implementation of measures to drive increased inbound tourism into Italy and to support the country's economic growth.
While maintaining the relevance of short-haul routes, the proposed network plan focuses on the profitable growth of long-haul flying from both Rome Fiumicino and Milan Malpensa. This will include flights to new destinations, increased frequency in certain existing markets and an enhanced network to Abu Dhabi to capitalise on growing traffic between Italy and the UAE, and provide Alitalia's passengers with seamless connectivity to Etihad Airways' global network.