Etihad says agreed principal terms to buy 49% of Alitalia

[Al Bhatti]

June 25, 2014

Alitalia planes wait on the tarmac prior to take off from Linate airport, in Milan, Italy. The airline has struggled to compete against low-cost airlines and high-speed trains on domestic and regional routes.

Etihad says agreed principal terms to buy 49% of Alitalia
Minister says decisive steps made in meeting with creditors

Etihad Airways said on Wednesday it had agreed principal terms and conditions to buy a 49 per cent stake in Alitalia in a last-ditch attempt to save the loss-making Italian carrier.

Italy’s flagship airline has made an annual profit only a few times in its 68-year history and received numerous state handouts before being privatised in 2008.

It was kept afloat by a government-engineered 500 million euro ($680 million) rescue package last year but risks having to ground its planes unless a deal can be struck with Etihad to allow it to revamp its flight network.

The two airlines will now finalise the deal as soon as possible, subject to regulatory approvals, they said in a joint statement without elaborating on the terms of the deal.

Alitalia’s board voted on June 13 to accept an offer by Etihad to invest in the airline, but did not give details.

Italy’s transport minister Maurizio Lupi has said Etihad is prepared to invest up to 1.25 billion euros ($1.7 billion) over the next four years.

The two carriers have been in talks since December, but a deal had been elusive due to Italy’s reluctance to bow to Etihad’s conditions over job cuts of around 2,200 and a restructuring of the airline’s debt.

But with Alitalia expected to run out of cash by August, sources have said the carrier, Italy’s government — which considers the airline a strategic national asset — and trade unions have little choice but to accept a deal on Etihad’s terms.

Lupi said on Wednesday that the two airlines had met with Alitalia’s creditors, which include Italy’s two largest banks Intesa Sanpaolo and UniCredit, on Tuesday, adding that “decisive steps forward” had been made.

“It’s increasingly clear that this marriage should happen because it’s obvious to all that we are dealing with a strong industrial investment that will offer our airline concrete growth prospects,” the minister said in a statement.

“I’m confident that this operation will come to a good end.” He added that a meeting with unions and the labour minister would happen soon to discuss the question of layoffs.

Intesa Sanpaolo, which is a key Alitalia shareholder as well as a creditor, is convinced a deal on debt restructuring will be reached, hopefully by the end of July, the chairman of the bank’s management board Gianmaria Gros Pietro said on Tuesday.

Gros Pietro said July 31 was the date set by Etihad to conclude the deal.

Options under discussion include the banks writing off parts of the debt and converting the remainder into equity.

A union with Etihad could bring Alitalia the money it needs to invest in a new strategy focused on long-haul routes, after it has struggled to compete against low-cost airlines and high-speed trains on domestic and regional routes.

A stake in Alitalia, which offers access to Europe’s fourth-largest travel market and flies 25 million passengers a year, would further Etihad’s efforts to expand its reach in Europe after already taking strategic stakes in Air Berlin and Aer Lingus.

The Abu Dhabi carrier and its regional rivals have utilised their strategic global location and government support to draw passengers away from traditional hubs in Europe and Asia to the Middle East.

Etihad says agreed principal terms to buy 49% of Alitalia | GulfNews.com

 

[Al Bhatti]

August 8, 2014

Etihad finally signs for 49% of Italy’s Alitalia

Etihad Airways has taken a 49 per cent share in troubled Italian national airline Alitalia, it announced late yesterday.

The Abu Dhabi carrier ended 12 months of negotiations in a deal worth more than €1.75 billion (Dh8.62bn), which aims to bring Alitalia back to profit by 2017.

Sticking points had included redundancies, cutting routes and negotiating new contracts.

“We believe in Alitalia,” James Hogan, chief executive of Etihad, said in Rome yesterday. “It is a great brand with enormous potential.

“With the right level of capitalisation and a strong, strategic business plan, we have confidence the airline can be … repositioned as a premium global airline again.”

Italy’s unions yesterday agreed to the deal, which will lead to the loss of 2,000 jobs but some staff will be re-employed in Abu Dhabi.

“This means they believe in Alitalia’s future,” said chief executive Gabriele Del Torchio. “Sometimes painful decisions are necessary but we do it to create a future.”

Etihad has gained a reputation for investing in and turning around struggling airlines to expand its reach into key regions.

Last year it increased its alliance to seven – Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways and Etihad Regional, formerly known as Darwin Airline.

But Alitalia could be the biggest test to its strategy. It has lost millions since it was privatised in 2009 and, despite the Italian government trying to bail it out with a €500m handout, was losing €1.5m a day with debts of €1bn.

Alitalia approached Etihad last year after its major shareholders Air France and KLM refused to provide more capital and reduced their holding to 7 per cent from 20 per cent.

“Market conditions have changed, internationalisation has become overwhelming and so it became clear to us that the only way to tackle the future for shareholders who invested in it, and Italy, was to find an international alliance,” Mr Del Torchia said.

Etihad has committed to pay €387.5m for the 49 per cent stake in Alitalia, €60m for five slots at London’s Heathrow Airport and €112.5m for 75 per cent of Alitalia’s Millemiglia loyalty programme.

The rest of the deal includes €300m from core Alitalia shareholders, €598m through debt restructuring and another €300m in new loans from Italian banks.

“Alitalia is the perfect ambassador for Italy and all that it represents,” said Mr Hogan.

“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.”

Alitalia and Etihad Airways were last month named the official global airlines for Expo 2015 in Milan.

Etihad finally signs for 49% of Italy’s Alitalia | The National

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August 10, 2014

New UAE-Italy ties after €560m deal between Etihad Airways and Alitalia

The Etihad Airways deal with Alitalia is expected to pave the way for further investment in trade and tourism between Italy and the UAE, according to the Italian ambassador.

On Friday, Etihad took a 49 per cent stake in the debt-laden carrier in return for a €560 million (Dh2.75 billion) investment in an overall deal worth more than €1.75bn that will involve a three-year rebuilding exercise and rebranding of Italy’s national airline.

The tie-up, which will increase the number of connections between the two countries and shift some Alitalia staff to Abu Dhabi, has made more deals likely.

Abu Dhabi’s Al Qudra Holding last week bought an Italian resort in Catania, Sicily for €140 million.

“A day before the signing of the Alitalia-Etihad agreement, Al Qudra bought a very important resort in Sicily – the Perla Ionica Resort,” said Giorgio Starace, Italy’s ambassador to the UAE. “It is interesting to see that in the plans that Etihad gave it is talking of establishing flights to other Italian cities; one of them is to Catania. This is very much linked. This is very important.”

Under the deal, Al Qudra will buy and refurbish the Perla Ionica, which will then be operated by Hilton, Mr Starace said. Al Qudra, an Abu Dhabi-based strategic investor, could not be reached for comment.

Mr Starace told The National last month that bilateral trade between Italy and the UAE was likely to grow by up to 15 per cent this year, boosted by demand for industrial machinery in the infrastructure sector in the UAE.

Trade last year between the countries was €6.9bn, according to figures from the Italian embassy in Abu Dhabi. About 80 per cent of that trade consisted of exports from Italy to the Emirates.

The embassy said that two-way trade rose 5.1 per cent last year and was up 56 per cent since 2010.

The biggest component of the southbound flow was jewellery, at €1.25bn. In the northbound direction, boats led at €575 million, while crude oil exports from the UAE to Italy were worth €202m. Trade growth is expected to come from the agriculture and food sector. Demand for Italian companies and machinery is high in the construction sector.

“Tourism will also go through an important boost in both ways. In one month, we issued more that 10,000 visas. It was a record,” said Mr Starace.

Etihad is keen to tap demand for travel from the more than 10,000 Italian citizens and 300 Italian companies that are based in the Emirates. It last month began daily flights to Rome, adding to its existing Milan service. Emirates Airline flies to Rome, Venice and Milan.

Mr Starace added that the collaboration between the two countries will also benefit from the link-up between next year’s Expo Milan and the Dubai Expo in 2020.

“Alitalia and Etihad are the official sponsors of Expo Milan 2015. Together, they will have a joint pavilion. The presence of the Italian companies in the UAE will increase, and the presence of UAE companies in the Italian market will also increase,” said Mr Starace.

“You can imagine the cohesive corporation that we have in front of us … We are building something important for the future of relations of these countries.”

The airline deal will result in the loss of 2,000 jobs at Alitalia, but some staff will be re-employed in Abu Dhabi.

“I don’t think all of them will relocate to Abu Dhabi, but surely an important portion [will be],” said Mr Starace. “The UAE is close to Italy – in terms of distance – and it’s a place that is more and more known by Italians.”

New UAE-Italy ties after €560m deal between Etihad Airways and Alitalia | The National