MILAN (Reuters) - Alitalia is about to finalize loan agreements with banks for up to 200 million euros ($270 million) pledged last year to help keep the Italian airline flying while it finds a potential new partner, its chief executive said.
The loans are part of a 500 million euro emergency package put together to give the troubled airline enough cash while it restructures and finalizes talks with Etihad Airways on a possible investment.
“In a few hours we will sign the loan agreement with the banks and give Alitalia addition financial means,” Gabriele Del Torchio told RAI Radio1.
The bank financing and a 300 million capital increase, which Alitalia completed in December, are expected to keep the carrier in the air for about six months, analysts have said. But the airline urgently needs a strong industrial partner such as Etihad to remain profitable in the long term.
Alitalia offers access to Europe’s fourth-largest travel market and flies 25 million passengers a year, but has been hit by competition from low-cost carriers and high-speed trains.
Alitalia and Etihad Airways are in the final phase of due diligence for a possible investment by the Abu Dhabi group in Alitalia, the companies said on Sunday.
A tie-up with Etihad could boost Alitalia’s liquidity and allow it to invest in a new strategy focused on long-haul routes that could make it profitable again, analysts have said.
Alitalia’s revised industrial plan - which includes cost cuts of around 300 million euros - and the airline’s debt of 813 million euros at end-September are at the centre of the tie-up talks with Etihad.
One of Etihad’s conditions is for banks to write off parts of the airline’s debt, a source close to Alitalia said, which banks have so far refused to agree to.
Lack of agreement over a debt restructuring has also contributed to Alitalia shareholder Air France-KLM’s (AIRF.PA) decision to shun the Italian firm’s cash call. This resulted in Air France-KLM’s stake in the Italian carrier falling to around 7 percent from 25 percent.
“We are in the most delicate phase of the talks ... but I have no doubt that all will do their part,” Del Torchio said.
Del Torchio said Air France-KLM remained an “absolutely vital partner”.
“We have a commercial agreement with them that will last at least until 2017, and they remain therefore a viable partner,” Del Torchio told the radio station.
Alitalia and Air France-KLM are both members of the SkyTeam alliance, a group of 19 airlines with a seat-sharing agreement.
The CEO of the Franco-Dutch group said last month the airline would look at reinvesting in Alitalia if its conditions on debt restructuring and cost cuts were met.
($1 = 0.7415 euros)
Reporting by Agnieszka Flak. Editing by Jane Merriman