Etihad close to deal for 49% of Alitalia says Reuters

News and financial agency Reuters has reported that the board of Alitalia – Italian national airline - will be meeting on Monday to consider a proposition from Abu Dhabi's Etihad Airways to buy almost half of the ailing Italian carrier.
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According to Reuters’ sources there was a successful meeting between the Italian Prime Minister Matteo Renzi and James Hogan , CEO of Etihad yesterday where disagreements over job cuts could have been overcome. Etihad has been looking at Alitalia's books for a possible investment since the start of the year. But the prospect of large job cuts at Alitalia and the airline's debt of almost a billion dollars had been major hurdles in the talks.

Loss-making Alitalia was kept afloat by a government-engineered $694 million rescue package last year. But it needs to find a cash-rich partner quickly to revamp its flight network or else risk having to ground its planes.

"The letter of intent (from Etihad) will arrive within a few days," the source told Reuters on Friday. "Etihad is not coming in to patch things up but to change the whole face of Alitalia which will become a five-star airline." The deal is expected to be worth around $700 million.

Industry analyst, Saj Ahmad said: “Etihad is pushing ever-harder to cement a bigger a foothold in Europe and any deal with Alitalia would be their most significant step since buying a slice of Air Berlin back in late 2011. Alitalia cannot survive as it is - it is a very weak player that requires a massive overhaul as well as fresh liquidity. Etihad can bring both of those elements to this deal, although the spectre of jobs cuts is one that the Italian authorities are going to have to stomach if they want Alitalia to stay away from the grave.
“One thing is clear, Etihad may well be buying a poorly run asset, but given the management prowess to turn loss making entities around, this is one gamble that is de-risking before the equity stake happens - Etihad knows it can make Alitalia's gateways work for them and it stands to reason that they are driving a hard deal now to ensure no slippages in the future. “