Etihad announced last Sunday (February 2), that it has set a 30-day deadline to finalise a possible investment in Alitalia. The two airlines in a joint statement said “Any issues that may prevent the establishment of an appropriate business plan will have to be resolved to ensure the plan can be implemented to move Alitalia to sustainable profitability,”
The statement was released while Italy’s prime minister, Enrico Letta, was on an official visit to the United Arab Emirates.
The announcement came after a month long review of Alitalia’s finances by Etihad. The Italian carrier is fast running out of cash and urgently requires this cash injection. Last year. Losses fell but were still
If Alitalia takes on Etihad, it will represent a very different strategy for the middle eastern carrier.
For the last few years, Etihad has bought equity stakes in half a dozen airlines on three continents and fed those passengers into the greater Etihad network. Etihad says that these investments brought 1.8 million people to Etihad providing it with 20per cent of its revenue. The equity partners include Aer Lingus, Air Berlin, Air Serbia, Air Seychelles, Virgin Australia and more recently Jet airways.
Late last year, this strategy evolved with the rebrand of Switzerland’s Darwin Airlines to Etihad Regional. It was the first time that the Etihad name was applied to a subsidiary.
A tie up with Alitalia is very different. Unlike most of the previous investments, Alitalia is a much larger carrier. It has a 104 planes flying 25million to 83 destinations. By comparison, Etihad has 91 planes and 96 destinations and carried 12 million people.
Etihad CEO said last year, that all of Etihad’s airline investments had to meet strict criteria for revenue generation and cost savings: “We don’t invest for the sake of it’s the nice thing to do,” Mr. Hogan said. “Unless we believe we can make it work long term, we’re not going to step in.”
One area of interest will be Alitalia’s US hubs (Chicago, JFK, Los Angles, Miami, Newark, Philadelphia, San Francisco and Washington DC). Etihad has long been interested in US expansion. This could be a significant entree into the US market for Etihad.
Lufthansa which has attacked the growth of – Etihad, Emirates and Qatar has urged European regulators to block any plans by Etihad Airways to invest Alitalia saying it is unfair competition by a state-owned airline.
If Alitalia gets its cash and Etihad relationship, then it’s future will be much more secure. if Etihad in March chooses not to invest in Alitalia, then Italy may need a new carrier.
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