Etihad has confirmed it is progressing with a mooted investment in struggling Italian airline Alitalia, with the company taking a 40 per cent stake as a result.
Italy's transport minister said in a television interview that Etihad would be investing around 600 million euros (£487.5 million) in Alitalia.
Chief executive of Etihad Airways James Hogan did not provide any firm details of how the investment will be put together, but he stated that it will be "beneficial" for both Alitalia and Etihad.
He said: "More importantly, it will give more choice and broader travel opportunities to business and leisure travellers into and out of Italy."
Gabriele Del Torchio, chief executive of Alitalia, described Etihad's investment in his firm as an "excellent" outcome for the business.
He said: "This investment will provide financial stability and confirms Alitalia's key strategic role as an infrastructure player in the travel and tourism industry in Italy for long-term growth."
It is being reported that close to 3,000 Alitalia members of staff are to be made redundant as part of the terms of the deal, with the Italian government set to play a key role in helping the redundancy process to run smoothly.
Alitalia has found life tough in the last few years, partly as a result of the impact of the global financial slowdown and also due to the extra competition within the European airline market in recent years. Alitalia has seen its share of the market slimmed down due to the increasing dominance of budget airlines such as Ryanair and EasyJet, both of which are particularly popular among travellers from the UK.
A state cash injection from the Italian postal service provided a boost to Alitalia in October last year, but the company has found its financial problems have remained evident since then.
Roberto Colaninno, president of Alitalia, said: "We are delighted to move forward with Etihad Airways providing Alitalia with an ideal strategic partner enhancing the Company's long term growth perspectives."
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