* Alitalia CEO to meet Etihad CEO on Tuesday -source
* Airline and creditors looking to hive off debt into
separate company -source
* Etihad won't take on too much debt, seeks Alitalia job
* Etihad seen investing at least 500 mln euros in Alitalia
(Recast with details from source)
By Lisa Jucca
MILAN, May 3 Alitalia and its creditors are
rushing to finalise by Tuesday a proposal aimed at persuading
Gulf-based airline Etihad to invest in the loss-making Italian
carrier, a source with direct knowledge of the matter told
Reuters on Saturday.
One of the options under discussion envisages hiving off a
large chunk of Alitalia's 800 million euros ($1.11 billion) of
debt into a separate company, a source told Reuters confirming
details of an earlier report by Italian daily Il Messaggero.
The plan was discussed at a meeting in Milan on Friday
between executives of the loss-making airline and four Italian
creditor banks including top Italian lenders UniCredit
and Intesa Sanpaolo.
Alitalia Chief Executive Gabriele Del Torchio is flying to
the Gulf on Monday and will meet Etihad's boss James Hogan on
Tuesday, the source said.
"The aim is to agree by Tuesday on a proposal to be put to
Etihad with a view of clinching a deal," the source added.
Alitalia, which was privatised in 2008 under a plan that
also involved spinning off unprofitable activities into a "bad"
company, has been unable to make a profit ever since and is
burning around 1 million euros of cash a day to keep flying.
The airline, which has struggled to compete with low-cost
carriers and high-speed trains, came close to bankruptcy in 2013
before being rescued in a government-engineered capital
Under the plan to woo Etihad, Alitalia would be turned into
a holding company and would take on the majority of the
airline's debt, the source said.
Alitalia's business operations, including its fleet and
flying slots, would be conferred to a new company controlled by
the holding company. The new company would be open to a direct
investment of more than 500 million euros by Etihad through a
capital increase, the source added.
Etihad is looking to buy up to 49 percent of the Rome-based
airline but does not want to absorb all of Alitalia's debt. It
has also asked that Alitalia's 14,000 staff are cut by up to
3,000, several sources close to the situation have told Reuters.
The bad company idea may face resistance as financial daily
Il Sole 24 Ore said creditor banks do not look favourably on the
prospect of creating a separate company to hold the bad debt,
since this would likely expose them to greater losses.
Il Messaggero also said Alitalia's remaining "good" company
would see a capital injection of 560 million euros by Etihad and
of 200 million by Italian investors.
Etihad, Alitalia and UniCredit declined to comment. It was
not possible to reach Intesa for comment.
($1 = 0.7212 Euros)
(Editing by David Holmes and Gunna Dickson)