Etihad CEO: “Nobody else wanted to invest in Alitalia”

The president and chief executive officer of Abu Dhabi-based Etihad Airways has stressed that global investment in the aviation industry should not be construed as a “threat”.

Speaking at an event in Italy, James Hogan was referring to Etihad’s €560m investment in struggling carrier Alitalia made last year.

Hogan said Etihad’s investment in Alitalia was a cost-effective way for both airlines to progress, while delivering more choice to consumers.

“Aviation is a global industry, not a local one. Like so many other industries, aviation should have access to global investment funds in order to provide the capital required to grow efficiently and remain competitive,” Hogan said.

He added: “Global investment is not a threat. It is both a lifeline and an energiser, which can only be good for European aviation, European economies and European jobs.”

Under the deal, Etihad acquired a 49 per cent equity stake in Alitalia; a 75 per cent stake in its loyalty programme MilleMiglia; the purchase from and leaseback of five pairs of arrival and departure slots at London Heathrow Airport; and shareholder loans to reduce Alitalia’s immediate financial liabilities.

Etihad’s commitment was the largest part of a broader investment with other stakeholders, which totalled €860m.

“Let’s not forget that nobody else wanted to invest in Alitalia,” said Hogan. “But we see a great future for Alitalia, and we are committed to working with other shareholders, and with the airline, to help rebuild it as a premium brand and a profitable business.”

Hogan said that as a strategic shareholder, Etihad needed to see a return on its investment, and together with Alitalia’s management had set a three-year timeline for achieving sustainable profits.

In this first year, the aim is to reduce losses, with break-even targeted in 2016 and profitability in 2017.

“We are not a bank. We needed to stabilise the business financially by providing fresh capital. We also needed to work with Alitalia, its unions and its partners to identify immediate opportunities to cut costs,” the CEO said.

“These included seeking efficiencies, restructuring the network and schedules, and reducing the short-haul fleet to maximise aircraft utilisation. There were immediate results.”

Etihad has helped expand Alitalia’s global reach by connecting the networks of both airlines in Abu Dhabi with the carriers also entering into codeshare agreements.

The Abu Dhabi airline also assisted Alitalia in sourcing new wide-body aircraft to increase long-haul services, said Hogan.

In June, Alitalia also unveiled new cabins and services on its A330-200s, and a bolder tailfin livery, in a bid to attract more long-haul passengers.

The Italian carrier followed Etihad in installing Poltrona Frau leather design business class seats and another key Etihad service, ‘Dine Anytime’, is now available to Alitalia’s business class passengers.

Wifi connectivity will also progressively be rolled out on all long-haul aircraft, officials said.

“Alitalia is a company with a great heritage and global brand recognition. But over many years it has lost its way and become a challenged business,” said Hogan.

“We have not only ensured that Alitalia stays in the air, we have also invested in protecting and creating jobs in Italy. We have invested in rebuilding the brand.

“A strong Alitalia is essential for Italy. Without Alitalia, air connectivity to, from and within Italy would be seriously diminished and left to others without the same commitment to Italy or Italians,” he added.