Etihad CEO gives 50-50 chance for Alitalia deal

By Praveen Menon and Stanley Carvalho

ABU DHABI (Reuters) - Etihad Airways' talks on investing in struggling Italian carrier Alitalia could swing either way and hinge on terms laid down by the Abu Dhabi-based airline, Etihad's chief executive said on Monday.

Talks between the airlines intensified last month and sources close to the matter said Etihad might be interested in buying a stake of up to 40 percent in the Italian carrier.

Asked in an interview how confident he was at this stage of the deal going through, James Hogan said: "It's 50-50." He added that the talks could go either way.

"We had also entered into due diligence with other airlines in the past and walked away."

Hogan said the deal could only go ahead if Alitalia met Etihad's criteria on costs, profitability, restructuring, the airline's network and strong management. He did not provide further details.

Sources have said Etihad wants heavy restructuring of Alitalia's debt and was also asking for job cuts at the Italian airline.

"I have not commented on job cuts," Hogan said when asked if job cuts were needed at Alitalia.

Etihad is expected to finish examining Alitalia's books within a month, Alitalia's chief executive said last Wednesday.

Alitalia has cut costs and refreshed its fleet since being rescued and privatised in 2008. But it has focused on domestic and regional markets where it has struggled to compete against low-cost airlines and fast trains on the busy Milan-Rome route.

A tie-up with Etihad could bring Alitalia resources it needs to invest in a new strategy based on long-haul routes.

Unlisted Etihad has made a series of acquisitions in recent months, taking minority equity stakes in Virgin Australia and Aer Lingus and raising its shareholdings in Air Berlin and Air Seychelles.

Hogan said Etihad could increase its stake in Virgin Australia by a further 3 to 6 percentage points over the next six months. Currently it has a stake of about 20 percent.

The Gulf carrier also plans about three or four code-sharing deals this year, in which it would share flights with other airlines. But it has ruled out joining any global alliances like its rival Qatar Airways, which joined the oneworld alliance last year.

(Editing by Andrew Torchia)