* Etihad to buy 49 pct stake in Alitalia
* Etihad to invest 560 mln euros in stake, other assets
* Aims to return Alitalia to profit by 2017
* Total investment deal valued at 1.76 bln euros
(Adds details, quotes, analyst)
By Antonella Cinelli
ROME, Aug 8 Abu Dhabi-based Etihad Airways will
buy almost half of Alitalia and invest 560 million euros ($751
million) into the lossmaking Italian airline in a turnaround
effort that will involve heavy job losses under a long-delayed
deal signed on Friday.
The two airlines have been in talks for nearly a year, but a
final agreement was held up by negotiations over thousands of
job cuts and debt restructuring.
"After much effort, a year of work and many late nights, we
did it," Alitalia CEO Gabriele Del Torchio told reporters after
the signing of the deal attended by Chairman Roberto Colaninno
and Etihad Chief Executive James Hogan.
Alitalia has made an annual profit only a few times in its
68-year history and received numerous state hand-outs before
being privatised in 2008.
It was kept afloat by a government-engineered,
500-million-euro rescue package last year.
Without a deal with cash-rich Etihad, its planes may have
been grounded within weeks, industry analysts have said. The
airline's net loss last year more than doubled to 569 million
In addition to Etihad's investment, which will pay for a 49
percent stake in the Italian carrier, a share in its frequent
flier programme and some slots at London's Heathrow Airport,
shareholders agreed to a 300 million euro capital hike.
Alitalia's creditor banks, which include UniCredit
and Intesa Sanpaolo, have agreed to an additional 300
million euros in new loan facilities and to restructure up to
598 million euros in Alitalia debts, valuing the total deal
signed on Friday at 1.76 billion euros.
Existing Alitalia shareholders including state-owned post
office operator Poste Italiane will group their holdings in a
so-called "mid-company" that will control 51 percent of the
shares in the restructured airline.
A union with Etihad will bring Alitalia money to invest in
more profitable long-haul routes and make it less reliant on
domestic and regional services where it has struggled to compete
against low-cost airlines and high-speed trains.
"This deal will definitely change the way Alitalia is
managed, boost its revenues per passenger thanks to better use
of its fleet and by adding new long-haul aircraft," said Andrea
Giuricin, a transport analyst at Milan's Bicocca University.
PAINFUL BUT NECESSARY
For the government, grappling with economic stagnation and
unemployment levels not seen since the 1970s, a deal to keep the
airline flying and limit job cuts was vital.
"Alitalia will return to be one of the foremost airlines in
the world. We did it," Transport Minister Maurizio Lupi said.
The deal comes at a cost, however. After long talks with
unions, Alitalia will cut 1,635 jobs from a staff of 14,000.
Alitalia CEO Del Torchio said decisions had been made that
were "painful but necessary".
Etihad's Hogan said Alitalia, which offers access to
Europe's fourth-largest travel market and flies 25 million
passengers a year, was a good fit for his airline.
"There are no more exciting destinations in Europe than
Italy," Hogan said, adding he wanted to revamp the Alitalia
brand. "To me, the sexiest airline in Europe is Alitalia."
The Gulf carrier already has stakes in Air Berlin
and Ireland's Aer Lingus and Friday's deal will help it
expand in Europe. However, Hogan said it would take time to turn
"The way Alitalia is going to look in the future is very
different," he said. "We're putting in a three-year plan to move
the airline back to profitability by 2017."
Etihad plans to turn Rome's Fiumicino Airport into an
intercontinental hub and improve Alitalia's cargo business, as
well as add long-haul connections from both Rome and Milan and
new routes between Abu Dhabi and Italy, Hogan said.
The deal is subject to approval by European authorities.
(1 U.S. dollar = 0.7454 euro)
(Additional reporting by Steve Scherer, James Mackenzie and
Robert Landucci, writing by Agnieszka Flak; editing by Jason