Etihad, in addition to its own aggressive growth has used these stakes in smaller airlines to feed passengers into its global network. The airline revealed that 2013 first-quarter sales from code-share and equity partners grew to 22% of its total sales.

The announcement of the Etihad investment will come as a relief for the Italian government, and staff of Alitalia. As outlined, in a few of my posts, Alitalia has been seeking a n injection of funds after several years of financial losses.  The Rome-based carrier probably only had until August of this year before it would run out of cash. This was after advance of a shareholders cash injection and bank loans earlier this year.

Once the ink on the sale is dried, then Etihad’s work will begin. Earlier in June, Etihad said it would invest in Alitalia if some key conditions were met. These include:

  • laying off staff – up to 2200 of Alitalia’s 14000 staff may go
  • ending loss-making routes
  • negotiating new employment contracts
  • reducing airport costs.

Many of these will not sit well with the highly unionised workforce a Alitalia. In addition, Lufthansa and Air France-KLM have appealed to the European Commission to scrutinise investments by foreign government airlines citing possible unfair competition. It could be bumpy skies at Alitalia  for a little longer.