60 AVIATION WEEK & SPACE TECHNOLOGY/JANUARY 15-FEBRUARY 1, 2015 AviationWeek.com/awstCathy Buyck BrusselsEtihad Airways has big plans for
eternally loss-making Alitalia
A
t fi rst glance, the tie-up of Alitalia and Etihad Airways
seems like the perfect partnership. The multimillion-
euro funding package, led by Abu Dhabi-based Etihad,
saved Italy’s long-suf ering fl ag carrier from bankruptcy and
gave Etihad increased access to the European Union (EU)—
one of the world’s largest and most af uent air travel markets,
with a population of 507.5 million. Etihad must now prove it
can restore its new equity alliance member to profi tability,
revitalize the brand and reinstate a service culture at Alitalia.
Furthermore, Etihad must convince the European Commis-
sion (EC) it has no ef ective control over the Italian airline.
The EC approved the Etihad-Alitalia deal under the EU’s
merger and competition regulations in November 2014. How-
ever, the ownership and control investigation by the EC’s di-
rectorate general of transport, DG Move, is still ongoing. For
Italy’s civil aviation authority ENAC, the new organization
conforms to EU rules on ownership and ef ective control.
ENAC last month concluded that, based on the documents
submitted by Alitalia-Compagnia Aerea Italiana (CAI) and
Etihad, the so-called “New” Alitalia will continue to be un-
der Italian control because 51% of the capital remains in the
hands of the Italian nationals. ENAC also stated “it fi nds no
evidence that there are any agreements between the share-
holders of Alitalia CAI and Etihad that may af ect and infl u-
ence the decisions to be taken by the New Alitalia.”
The EC has received documentation from the Italian au-
thorities and will assess whether reality matches the paper-
work and whether control of Alitalia remains in the hands of
Italian nationals now that the fi nancial transaction is com-
pleted and the new company has begun operations. There
is no set deadline for the EC’s analysis and no time limit for
the legal decision.
The “new” Alitalia—named Alitalia SAI-Societa Aerea
Italiana—began operating on Jan. 1.
A new airline board and management team has been
named. Silvano Cassano became Alitalia’s CEO, taking over
after Gabriele del Torchio’s resignation. Cassano is the for-
mer CEO of Benetton, an Italian clothing, manufacturing and
retail group. He still has close ties to the Benetton family,
which holds shares in Alitalia and Aeroporti di Roma, the
management company for Rome Fiumicino and Ciampino
airports. Cassano also worked at Hertz with Etihad Airways
CEO James Hogan.
The new chairman is Luca Cordero Di Montezemolo, the
former Ferrari chairman. Di Montezemolo was nominated to
the board by Alitalia, and is closely connected to the ruling
family of Abu Dhabi. Hoping to avoid protracted discussionswith the EC regarding who ef ectively controls Alitalia
and to defl ect suspicions that the United Arab Emir-
ates shareholder is in command, Etihad has carefully
selected its representation on the board, appoint-
ing former Alitalia CEO and IATA Director General
Giovanni Bisignani as one of its three board members.
Since its 2009 bailout and full privatization, Alita-
lia has posted losses of over €1.1 billion ($1.3 billion).
But Hogan is confi dent he can build the Italian airline
“as a competitive, sustainable and profi table business
that can operate successfully in the global air travel
market.” For Alitalia, Etihad is targeting “sustainable
profi tability from 2017,” he adds.
“We know we have much work to do, and we will move
quickly,” Cassano says. “We will develop a range of new desti-
nations, new services and a fl eet with more long-haul aircraft,
a new livery and new refurbished aircraft interiors. And our
customers, who from now on will be our guests, will be our
inspiration,” he vows. Staf also will have new uniforms.
As part of its new focus on long-haul destinations, Alita-
lia will resume service to China in the spring, and increase
service to North America and Latin America. Services to
Beijing, Shanghai, Seoul, San Francisco, Santiago and Mexico
City are under consideration. In the current winter season,
the Alitalia Group is operating 3,850 weekly fl ights to 83 des-
tinations, 26 of which are in Italy.
Though declining oil prices and support from the Italian
government may be a boon for the “new” Alitalia, the carrier
must still contend with Europe’s ongoing economic crisis and
fears of a “triple-dip” recession due to defl ation. Under the
€1.76 billion rescue deal signed in August, Etihad is investing
€560 million in Alitalia: €387.5 million for a 49% stake in the
airline; €112.5 million for a 75% shareholding in Alitalia’s loyalty
program, MilleMiglia; and €60 million to buy fi ve slot-pairs
at London Heathrow Airport to be leased back to the Italian
carrier. The remaining 51% shareholding is held by Alitalia
CAI through holding company MidCo, which has assumed the
agreed assets and liabilities necessary to continue the airline.
Etihad Airways’ investment is complemented by a further
equity investment of €300 million from several existing core
Alitalia shareholders, including Intesa San Paolo (€88 mil-
lion), Poste Italiane (€75 million), UniCredit (€63.5 million),
Atlantia (€51 million), Immsi (€10 million), Pirelli (€10 million)
and Gavio (€2.5 million). The Air France-KLM group, which
became a core shareholder with a 25% stake during Alitalia’s
fi rst rescue in January 2009, did not participate in the latest
capital increases to save the troubled Italian airline.
Up to €598 million in additional fi nancial restructuring of
short- and medium-term debt has been provided by fi nancial
institutions and existing-bank shareholders. Another €300
million of new loan facilities have also been extended by Ital-
ian fi nancial entities.
Alitalia is Etihad’s seventh equity alliance member, and
its fourth in Europe after Air Berlin (of which it holds 29%),
Air Serbia (49%), and Aer Lingus (4.99%). Etihad has signed
an agreement with Darwin Airline to purchase 33.3% of the
Swiss regional airline, which was rebranded to Etihad Re-
gional in January last year. Approval by Swiss authorities
for Etihad’s proposed investment is pending. cAIR TRANSPORTNew Beginnings
The “new” Alitalia will get a new livery, and its cur-
rent long-haul fl eet of Airbus A330s will expand
as it adds intercontinental destinations.JOEPRIESAVIATION.NET