Etihad Airways potentially closing in on Alitalia deal

The prospect of Etihad Airways buying nearly half of Alitalia has significantly increased after a meeting between Etihad's boss and Italy's prime minister, reports Reuters.

Etihad has been looking at Alitalia's books for a possible investment since the Italian carrier got in to cash worries last year and has since been kept afloat by a government-engineered 500 million rescue package.

Anaylst Saj Ahmad commented: “Etihad is pushing ever-harder to cement a bigger a foothold in Europe and any deal with Alitalia would be their most significant step since buying a slice of Air Berlin back in late 2011.“Alitalia cannot survive as it is - it is a very weak player that requires a massive overhaul as well as fresh liquidity. Etihad can bring both of those elements to this deal, although the spectre of jobs cuts is one that the Italian authorities are going to have to stomach if they want Alitalia to stay away from the grave.”

Ahmad added: “One thing is clear, Etihad may well be buying a poorly run asset, but given the management prowess to turn loss making entities around, this is one gamble that is de-risking before the equity stake happens - Etihad knows it can make Alitalia's gateways work for them and it stands to reason that they are driving a hard deal now to ensure now slippages in the future.”