Abu Dhabi-based Etihad Airways has signed a deal to buy 49% stake in Italian carrier Alitalia for €387.5m as part of a €1.75bn turnaround plan.

The transaction will allow Alitalia to invest in a strategic business plan resulting in new long-haul routes, a revitalised brand and a greater focus on Italian tourism and trade promotion.

Etihad Airways will buy a 75% share in Alitalia Loyalty Spa, as well as five pairs of slots at London’s Heathrow Airport.

Etihad will provide €560m through equity injections, asset purchases and other financing facilities and funding arrangements, while existing core Alitalia investors agreed for a further equity investment of €300m.

"We have confidence the airline can be turned around and repositioned as a premium global airline once again."

In addition, financial institutions and existing bank shareholders will provide €598m in financial restructuring of short and medium term debt.

The equity investment is subject to completion by Alitalia and certain conditions for its key private and public stakeholders as well as final regulatory approvals.

Etihad Airways president and CEO James Hogan said: "On completion, we are committed, with the other shareholders, to build a reinvigorated Alitalia as a competitive, sustainable and profitable business that can operate successfully in the global air travel market.

"With the right level of capitalisation and a strong, strategic business plan, we have confidence the airline can be turned around and repositioned as a premium global airline once again.

"However, ultimately it has to work as a business and the goal is for sustainable profitability from 2017."

Defence Technology