Etihad concludes 49% investment deal with AlItalia

Speaking at a press conference in Rome this afternoon, the Abu Dhabi airline’s president James Hogan said that Etihad would become a minority shareholder with 49% with a €560million ($750m) investment.
Etihad has also taken over AlItalia’s Heathrow landing slot rights and leased them back to the Italian national carrier as part of the investment.. Its total investment also includes €112.5 million ($151m) to acquire a 75 per cent interest in Alitalia Loyalty Spa, which operates MilleMiglia, the airline’s frequent flier programme.
The 51% core shareholders have added a further €300 million ($402m) of investment and an additional €598m ($802) of financial restructuring of short and medium term debt has come from the Italian financial institutions along with a further €300million of new facilities.
Analyst Saj Ahmad said: Etihad’s huge investment in Alitalia is far beyond what was initially concocted. “The charge towards revamping, rebranding and delivering Alitalia back into the fold of profitability is a must - the significant investment by Etihad makes the challenge and pressure to produce results becomes even more important now than at any time before - or indeed, compared to Etihad's other piecemeal investments,” he said.
James Hogan had met protests when he arrived in Italy on Tuesday to conclude the negotiations and was asked at the press conference if he realized what was in store.
“We have asked al the hard questions already. It is going to be tough but it will result in a win-win-win deal for Italy, for Alitalia and for Etihad,” he 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 capitalisation and a strong, strategic business plan, we have confidence the airline can be turned around and repositioned as a premium global airline once again.”
Hogan said that AlItalia would be undergoing a full rebranding in the first quarter of next year as the first stage of the three-year turnaround plan. “Ultimately it has to work as a business, and the goal is for sustainable profitability from 2017.” Hogan said.
Saj Ahmad is not so sure. “While the jury is still out on whether Alitalia has the stomach to absorb the dramatic and drastic changes needed to become a profitable airline, it is clear that Etihad sees more than intrinsic value in investing in the ailing Italian flag carrier. Etihad simply has to make this deal work - even more so than its deals with Air Berlin and Jet Airways because the investment in Alitalia is the biggest to date that it has ever done. Failure is not an option and nor is throwing good money after bad.
‘Etihad can enact changes all it likes - the real challenge will be to get over the immense cultural and operational barriers at Alitalia to turn the loss making airline around. Judging by the time and effort it has taken Air Berlin so far, it's not clear that the 2017 goal at a financially worse airline like Alitalia can be achieved by that target date,” he said.

Hogan and Gabriele Del Torchio, Alitalia’s CEO agree it will be tough and that “change has to start right now”.
Hogan said: “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 travellers, 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.

“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.”
Del Torchio, 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.”
An early step in the strategic change will be to reduce some short haul flights and expand long haul – including an increased frequency between Abu Dhabi and Rome and the start of flight between the UAE capital and Milan which Etihad said will open up “a range of new connecting opportunities for passengers of both airlines”.
Hogan said: “Italy is a hugely important market for Etihad Airways, from both trade and tourism points of view. The UAE is Italy’s top trading partner in the Middle East and North Africa region, and is home to more than 10,000 Italian citizens and 300 Italian companies.
“The possibilities when we knit together our network with those of our existing equity partners, including airberlin, Air Serbia, Etihad Regional, Jet Airways, Virgin Australia, Air Seychelles and Aer Lingus, and of course our strategic codeshare

PICTURED: (from left to right) Etihad Airways Chief Financial Officer James Rigney, Alitalia Chairman Roberto Colaninno, Etihad Airways President and Chief Executive Officer James Hogan, and Alitalia Chief Executive Officer Gabriele Del Torchio mark the official signing of the investment deal in Rome, Italy.