Etihad ‘threatens’ to withdraw from Alitalia investment

Abu Dhabi airline Etihad which owns 49% of Alitalia is having second thoughts on its investment in the airline because of the Italian government’s failure to honour a number of promises. 

Various reports in the Italian media say that Etihad are “threatening” to withdraw its investment after a mere 18 months, with Alitalia currently losing €500,000 a day.

In an interview with Italia daily newspaper Il Corriere Della Sera, Etihad’s chairman and CEO James Hogan said he was “disappointed” with the Italian government led by Matteo Renzi because “a number of the condition precedents haven’t been met.” 

While insisting that Abu Dhabi airline is committed to Alitalia he warned that the government should do its part. “We’re committed to the partnership, to tackle these issues, but frankly as an investor we need Italy to support us.”

Earlier this year, Alitalia signed a Memorandum of Understanding with ther Maltese government over the possible acquisition of 49% of Air Malta by the Italian airline.

However, Prime Minister Joseph Muscat is very close to terminating the agreement signed with Alitalia in April as there are serious doubts on whether it will benefit the country and Air Malta’s employees.

If Etihad pull out of Alitalia, it would definitely spell the end of Alitalia’s interest in Air Malta because the Italian airline’s future will be on the line. 

Reports in the Italian media paint a bleak picture of Alitalia’s future given that Etihad are only willing to invest more money in new aircraft and expand its operations if it is allowed to use Italy as a hub for intercontinental flights and carry out a restructuring process. 

One of Etihad’s main bones of contention is the Italian government’s failure to allow the airline to use Linate airport in Milan as its base for intercontinental flights and link Milan to the US and the Middle East.

However, the Italian government has failed to get permission from the EU to allow flights to non-EU destinations from Linate. 

“We simply want to see liberalisation, because all the airports in the world can’t tell you when you can and can’t fly. London City, Heathrow or Gatwick. Three airports that are open for all. But here in Italy you‘ve got Linate restricted. So we can’t use it as effectively as we want to,” Hogan said.

Hogan is also concerned with the strong presence of low-cost airlines, with Ryanair increasing its market share from 20% to 50% in the 18 months since Etihad invested $2.4 billion in Alitalia. 

“In most markets of the world national carriers are protected to some degree so that as I mentioned earlier, but here in Italy you have six low cost airlines and you have none at Heathrow and none in Paris Charles de Gaulle,” Hogan said. 

Asked whether he has brought this up with Renzi, Hogan said “We do. We raise these issues with the Minister of Transport. What we see in other national carriers, we believe Alitalia should be treated the same.”

He added that “Alitalia is rebuilding, Alitalia needs to get back on its feet. The competitive issues and the economic issues are our job and we’ll tackle those. But the stakeholders of Italy Inc must also help the Italian carriers. If they don’t, that’s a major concern.”

Hogan also hinted at a downsizing exercise, pointing out that the market is changing and legacy airlines such as British Airways and Iberia underwent a restructuring process in order to compete with easyJet and Ryanair. 

“You see us being back with brand, product and service to be competitive. But we need to continue the restructuring to become more efficient. Taking advantage of technology and finding ways that people are more productive.”

“How does Alitalia use its workforce more effectively? How can it maximize the number of hours aircraft can fly? And maximizing the legal use of workers. As long as things are done, of course, within the legislative framework.”

Hogan added “we may need to downsize, but if we grow the business in the longer term and bring on more aircraft, we may downsize in one part of the business with skillsets that are no longer relevant and grow in other parts of the business where we can employ more pilots, more cabin crew and more engineers.”

Likewise, Air Malta has been undergoing a restructuring process costing some €230 million ever since it was given the green light for state aid under strict European Commission rules. 

With low cost giant Ryanair close to taking the majority market share of the incoming passenger market to Malta and Air Malta’s financial sustainability in serious doubt, the part-privatisation of Air Malta is a priority for Muscat’s government. 

MaltaToday is informed that Alitalia are due to take a final decision on the acquisition of Air Malta this month following a rigorous due diligence exercise. 

But last week Muscat insisted that all options were on the table, and no deal would be signed with Alitalia if it would not give Air Malta the ultimate benefits.