Alitalia-Etihad Deal Face Major Hurdles

A source close to the transaction confirmed last Thursday that Etihad Airways, the UAE based air carrier, had taken a 'more rigid' stance as to conditions before it would invest in Alitalia, the floundering Italian airline. Despite such position, the Italian government still sees available option to find a solution to the impasse.

Rome was expecting Etihad to submit a proposal detailing its possible investment in the air carrier. One of the major hurdles to the completion of the deal is the Gulf based air carrier refusing to assume all of Alitalia's current legal and financial problems, according to a source.

A government source said, "It is nothing that cannot be overcome. The government is counting on finding a solution." Another source commented, "The position of the Arab group has hardened, some problems have been more markedly underlined than before." Another source, this time from the UAE side, said, "It's part of negotiations... It is no way means the deal is over. They have just put tough conditions on the deal."

Formally, both Etihad and Alitalia refused to comment on the progress of the negotiations.

Etihad though had previously stated that it would only invest in Alitalia if the air carrier fits in its network as well as the drafting of a credible plan for the airline to return to profitability. The UAE based carrier has been reviewing Italian air carriers books since the start of 2014 as part of its due diligence prior to a possible investment. Two key elements identified for the deal to push through would be massive layoffs for the air carrier as well as the Eur800 million indebtedness remaining in its books.

Alitalia was kept afloat through a government backed Eur500 million rehabilitation package put together last year. The funds though are running dry, thus the need to find a cash flush partner in order to revamp its current flight network or run the risk of being grounded.

Tags

Alitalia, Etihad Airways, investment, due diligence, indebtedness

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