Proposed Alitalia investment gives Etihad valuable access to Italian market

Planned €300m investment to acquire 40 per cent of underperforming European carrier.

Alitalia airplanes are parked at Fiumicino airport near Rome. Tony Gentile / Reuters
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Etihad has gained global prominence for its pioneering use of its equity alliance to expand its route network. By investing in carriers with capacity in regions where it has targeted growth, the airline has rapidly expanded the list of destinations it serves.

But the strategy could face its biggest test yet in its proposed investment in Alitalia.

Since late last year, Etihad and Alitalia have been talking about a possible investment that, according to media reports, would involve Etihad pumping about €300 million (Dh1.51 billion) to acquire 40 per cent of the indebted Italian carrier.

Matteo Renzi, the new Italian prime minister, said that he was taking his predecessor’s view and supporting Etihad’s possible investment. But how can it be a win-win for the two carriers?

Analysts say that an investment by Etihad in Alitalia will bring liquidity and management knowledge focused on Alitalia’s long-haul routes, which eventually would make it profitable.

Last month, the pair said they were working on due diligence and forming a strategy to benefit their mutual objectives and move Alitalia to profitability.

Alitalia serves one of Europe’s biggest travel markets and flies about 25 million passengers every year. But it also sits on a debt pile of €800m. Domestically, it faces pressures from budget carriers and high-speed trains.

“There’s a lot of speculation about Alitalia. A lot of it is from the past,” said James Hogan, the president and chief executive of Etihad Airways.

“Alitalia did a pretty good job in the past five years of restructuring their business. Now we are very clear in all our equity investments.”

For its part, Etihad has been funnelling more passengers of its partners to its Abu Dhabi hub through its equity stake and codeshare strategy. A revived Alitalia would only add to this lucrative traffic.

“The first criteria is our network benefit. Italy is the third-largest travel market for Europe – there is strong traffic flow,” said Mr Hogan.

selgazzar@thenational.ae