Alitalia shareholders yesterday approved a share issue of up to $336mn to keep the Italian flag carrier flying as it seeks to finalise a life-saving tie-up with Etihad Airways.
Alitalia shareholders yesterday approved a share issue of up to €250mn ($336mn) to keep the Italian flag carrier flying as it seeks to finalise a life-saving tie-up with Etihad Airways.
Abu Dhabi’s state-owned Etihad Airways plans to buy a 49% stake in the Italian carrier. The two have been in talks for seven months, but a final agreement has been held up by negotiations over thousands of job cuts and a debt restructuring at Alitalia requested by Etihad as a condition for the deal.
The share issue is intended to beef up Alitalia’s balance sheet while a deal with Etihad is being finalised. “This cash call doesn’t change the fact that Alitalia is in a state of emergency,” said Andrea Giuricin, a transport analyst at Milan’s Bicocca university. “They urgently need to reach a deal with Etihad.”
The unlisted airline has still not publicly released its results for 2013. Sources close to the matter told Reuters in October that the airline was expected to post a net loss of around €500mn, wider than its loss of €280mn the previous year.
Alitalia denied the report at the time, but various Italian media have since reported similar figures. Alitalia has made an annual profit only a few times in its 68-year history and received numerous state handouts before being privatised in 2008. It was kept afloat by a government-engineered €500mn rescue package last year, but risks having to ground its planes unless a deal can be struck with cash-rich Etihad to allow it to revamp its flight network. Etihad Chief Executive James Hogan said last week he expected to conclude the deal this month, although he added that the deadline may be extended, if needed. Alitalia CEO Gabriele Del Torchio denied an unsourced report in daily Corriere della Sera yesterday which said Hogan had given Alitalia until Monday to agree to the tie-up or else the Gulf carrier’s proposal would no longer stand. A source close to Etihad also said there was no Monday ultimatum.
Alitalia shareholders will again meet “during the vacation period” to deliberate on the tie-up deal, one investor said after yesterday’s meeting.
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. However, sources told Reuters this week that Poste Italiane, which invested in Alitalia last year as part of a government-engineered rescue and now owns 20%, said it would only invest more in Alitalia if it can avoid taking on the carrier’s past liabilities, a move that could hamper the Etihad deal. Transport Minister Maurizio Lupi yesterday urged all parties to accept their responsibilities and finally come to an agreement, saying the options for Alitalia were either “improvement or the abyss”.
A marriage with Etihad could bring Alitalia money to invest in higher-margin, long-haul routes and make it less reliant on domestic and regional routes where it has struggled to compete against low-cost airlines and high-speed trains.
Etihad already has stakes in Air Berlin and Aer Lingus. A stake in Alitalia, which offers access to Europe’s fourth-largest travel market and flies 25mn passengers a year, would boost its efforts to expand in Europe.
