(By Sandra Cordon)
Italian carrier Alitalia is in for
some "painful and arduous" restructuring but should see a deal
with Etihad Airways in a matter of weeks, the airline's chief
executive officer said Monday.
Gabriele Del Torchio said that changes were necessary to
attract essential investment from Abu Dhabi-based Etihad, which
he said is prepared to invest 560 million euros in the
cash-strapped Alitalia.
Del Torchio acknowledged that 2,200 Alitalia employees from
a staff of about 14,000 will be laid off as part of the changes
demanded by Etihad before it finalizes its investment, likely by
July.
"There is an absolute need for Alitalia...to go through a
complex, painful and arduous process of restructuring," he said.
The job cuts are non-negotiable for Etihad, he added.
Last week, Italian Labor Minister Giuliano Poletti said
that the deal could require the Italian carrier to cut as many
as 2,500 jobs and restructure as much as 800 million euros in
debt.
Poletti will meet on Tuesday with unions to talk about job
losses related to the deal, Transport Minister Maurizio Lupi
said.
Del Torchio said that a tentative pact could be ready to go
before the Alitalia board by the end of this week.
The negotiations, which have been going on for six months,
would see Etihad take a share as large as 49% in Alitalia.
That had triggered concerns with the European Commission,
which warned Italian authorities to ensure the United Arab
Emirates carrier does not gain a majority holding.
EC rules require that majority ownership of European
airlines remains in European hands, and last week the Italian
government reassured the EC that those rules were being obeyed.
Speaking at an aviation conference, Del Torchio said the
deal would keep a majority of ownership "in Italy, or rather
Europe, since Air France is a partner".
"We're not selling the airline to these potential partners
in Abu Dhabi, but we want to ally with them," he added.
To survive, said Del Torchio, Alitalia must also become
more operationally efficient and strengthen its
"intercontinental presence" as a carrier known for serving more
than Italian and European markets.
Unions have been generally supportive of the investment by
Etihad, which will keep the Italian carrier a viable employer,
and had said little about the job cuts when these were still
rumours.
The tie-up would allow Etihad to expand its roots in the
lucrative European market while giving new life to Alitalia,
which was subject to a government-led bailout last fall - only
the latest in a series of restructuring attempts by the carrier
as it struggles to remain competitive.
Last October, the Italian government engineered a
500-million-euro Alitalia restructuring plan that included a
300-million-euro capital increase and 200 million euros in new
lines of credit.
However, major investor Air France-KLM at the time rejected
the restructuring plan, saying it did not go far enough to
reduce Alitalia's debt - which is also a sticking point for
Etihad.
According to recent media reports, Etihad has been
negotiating with banks that are the major creditors in Alitalia,
including Intesa Sanpaolo and UniCredit, in an effort to see the
banks write down a sizeable amount of the Italian airline's
debt.
Those talks are at an advanced stage, said Del Torchio.
The proposed investment also triggered protests from rival
European airlines, which were also upset about last fall's
bailout plan that saw Poste Italiane agree to underwrite the
October capital increase to the tune of 75 million euros.
That triggered complaints from rival European carriers of
State aid, an accusation that the Italian government has denied.
In February, German airline giant Lufthansa went further
calling on the European Commission to halt Etihad's proposed
investment in Alitalia, alleging the use of State aid in
disguise to break competition rules.
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