Etihad Airways and Alitalia confirmed today they have agreed to the principal terms and conditions under which Etihad will acquire a 49 percent equity stake in the struggling Italian carrier.
And the rest of the airline industry just quaked a little bit.
The upstart Middle East airline, which has only been in operation since 2003, has shaken up the industry with its strategy of making investments in other airlines – some big, some small, but all of which give Etihad more and more access to global routes. Just what its competitors, both in the Gulf region and internationally, have feared.
The European Commission is currently investigating whether foreign airlines are attaining too much control, despite taking just a “minority” stake in European-based airline, which could lead to a violation of European Union law. Ironically, the airlines leading the charge are Lufthansa and Air France-KLM. Air France-KLM had a stake in Alitalia but declined to participate in this newest round of re-investment.
Even U.S.-based airlines have complained that Etihad, as well as Emirates and Qatar, receive subsidies from the United Arab Emirates government.
The deal with Alitalia also allows Etihad to branch out to various sectors of the market. White Etihad brands itself as a luxury carrier, its investments allow it to reach multiple market and pricing sectors and draw more traffic to its Abu Dhabi home base.
This is the eighth such investment for Etihad, but clearly the largest. Previously, Etihad has taken investment shares in Darwin Airline (Switzerland), Air Berlin (Germany), Virgin Australia, Jet Airways (India), Air Serbia, Air Seychelles and Ireland’s Aer Lingus.
Etihad Airways said its agreement with Alitalia was the latest step in a process which could lead to the finalization of a proposed transaction.
Further steps will include completion of the transaction documents, finalization of the conditions precedent, application for regulatory approval and final shareholder and board approvals.
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