Etihad Airways helped expand Alitalia's global reach by connecting the networks of both airlines via Etihad's hub and home base in Abu Dhabi, with each carrier entering into codeshare agreements on each other's services.
Abu Dhabi - Airline on new course towards achieving profitability: Hogan
Etihad Airways needed to see a return on its investment, said James Hogan president and chief executive officer of Etihad Airways, which 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, the president said.
"We are not a bank," Hogan said. "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. These included seeking efficiencies, restructuring the network and schedules, and reducing the short-haul fleet to maximise aircraft utilisation. There were immediate results."
Hogan was speaking at the Rimini Roundtable Discussion, a prestigious annual event held in the historic Italian town of Rimini to discuss issues of cultural and economic importance to Italy.
Last year's ground-breaking investment by Etihad Airways in Alitalia has revitalised Italy's national airline, and set it on a new course towards sustainable profitability, Hogan said. Addressing the segment titled "Banking on and Investing in Italy", Hogan said: "Alitalia is a company with a great heritage and global brand recognition. But over many years Alitalia has lost its way and become a challenged business."
Etihad Airways invested ?560 millions in a multi-level deal comprising a 49 per cent equity stake in Alitalia, a 75 per cent stake in Alitalia's loyalty programme, MilleMiglia, the purchase from and leaseback to Alitalia 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 ?860 million.
"Aviation is a global industry, not a local one," Hogan said. "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.
"Global investment is not a threat," he said. "It is both a lifeline and an energiser, which can only be good for European aviation, European economies and European jobs."
Hogan said the Etihad Airways investment in Alitalia was a cost-effective way for both airlines to progress, while delivering more choice and better quality to consumers.
"Let's not forget that nobody else wanted to invest in Alitalia," Hogan said. "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.
"A strong Alitalia is essential for Italy," he said. "Without Alitalia, air connectivity to, from and withinm Italy would be seriously diminished and left to others without the same commitment to Italy or Italians."
Etihad Airways helped expand Alitalia's global reach by connecting the networks of both airlines via Etihad's hub and home base in Abu Dhabi, with each carrier entering into codeshare agreements on each other's services. Etihad also assisted Alitalia in sourcing new wide-body aircraft to increase long-haul services.
"We have not only ensured that Alitalia stays in the air," Hogan said. "We have also invested in protecting and creating jobs in Italy. We have invested in rebuilding the Alitalia brand. And we have invested in Alitalia with the clear commitment that we will help it to grow into a prestige global brand, and an airline and company which contributes to Italy."