Removal of Etihad CEO signals final nail in coffin for Air Malta acquisition

The Gulf airline Etihad, to which Air Malta’s fortunes have been tagged in the hope of a strategic acquisition, could be planning to remove James Hogan as its CEO over his failed spree of acquisitions in Europe, Handelsblatt reported citing “multiple independent sources” who spoke on condition of anonymity.

Air Malta was hoping that Alitalia, a subsidiary of Etihad, would acquire 49% of the ailing airline in a bid to remain afloat after a massive €260 million restructuring package negotiated under strict EU state aid rules.

Air Malta must reduce staff and gain new efficiencies to compete against low-fares giants like Ryanair, without taking any form of state aid, under EU rules.

But hopes that it could achieve this through a strategic acquisition by Alitalia or Etihad, appear to have faded in recent weeks.

James Hogan sought to expand Etihad’s presence in Europe, buying a 29% stake in Air Berlin in 2011, and then Air Serbia in 2013 and finally the stake in Alitalia three months later.

This European expansion proved to be a misadventure when Etihad lost €2.5 billion on these investments, €477 million alone with Air Berlin as of 2015.

Eithad is now performing a volte-face on its European expansion, with supervisory board chairman Ahmed Ali Al Sayegh leading the roll-back, with plans to sell European holdings “at considerably under value, one insider told Handelsblatt.”

Etihad declined to comment on this shift in strategy.

The Abu Dhabi airline is said to be having second thoughts on Alitalia investment because of the Italian government’s failure to honour a number of promises.  Various reports in the Italian media say that Etihad as “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.” 

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 was already reported to be 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.

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.