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Etihad expects to close Alitalia talks by end July

Italian airline’s creditors agree to debt restructuring; majority of trade unions have given green light to job cuts.

A smaller Alitalia will be able to compete with the best in Europe but job cuts and other sacrifices are necessary to make it profitable, the CEO Etihad Airways, which is close to buying nearly half of the Italian carrier, said on Wednesday.

Etihad plans to buy 49 per cent of the loss-making airline in a deal that Rome hopes will bring Alitalia the money it needs to invest in a new strategy focused on more lucrative long-haul routes.

“We want to guarantee the success and long-term viability of Alitalia or we wouldn’t be here,” James Hogan told journalists at an event in Rome. He said that while all parties were focusing on concluding the negotiations by the end of this month, the deadline could be extended if needed.

A final agreement has been held up by talks over thousands of job cuts and debt restructuring at Alitalia requested by Etihad as a condition for the deal.

Alitalia’s creditors, which include Italy’s two biggest lenders Intesa Sanpaolo and UniCredit, have in principle agreed to restructure parts of Alitalia’s debt by writing off some of it and converting other parts into equity. The majority of the trade unions representing Alitalia workers have also given the green light to jobs cuts of about 1,635, which are less than the 2,250 requested by Etihad but still represent a blow for a country where unemployment is at its highest level since the 1970s.

“The Alitalia brand could be one of the most successful in Europe,” Hogan said, but added that the airline, which has made an annual profit only a few times in its 68-year history and received numerous state bailouts, needed to be downsized first. “We must have the right starting point, we need the right-sized airline,” he said.

Etihad has promised to return Alitalia to profit by 2017, turn Rome’s Fiumicino airport into an intercontinental hub and boost links from Milan.

Hogan declined to comment on any figures. However, Italy’s transport minister said last month that Etihad was prepared to invest up to €1.25 billion ($1.69 billion) over the next four years to buy its stake and revamp the carrier.