Alitalia (AZA, Rome Fiumicino) and Etihad Airways (EY, Abu Dhabi International) have signed a transaction implementation agreement which will see a total of EUR1.758billion (USD2.357billion) being invested into the ailing Italian carrier.

Announced in Rome during a joint press conference on Friday, August 8, the deal will see the Emirati carrier invest a total of EUR560million via a combination of equity injections, asset purchases and other financing facilities and funding arrangements to re-structure the airline's balance sheet.

The largest tranche, EUR387.5million, will be used to secure a 49% stake in Alitalia while EUR112.5million will go towards the acquisition of a 75% interest in Alitalia Loyalty SPA, which operates the airline's frequent flyer programme, MilleMiglia.

Etihad has also purchased five Alitalia slot-pairs at London Heathrow for EUR60million which will then be leased back to the Italian airline on an arm's length basis. This transaction is due to be completed on 31 December 2014.

Shoring up the agreement, an additional EUR300million has also been sourced from existing core Alitalia shareholders including: Intesa San Paolo (EUR88million), Poste Italiane (EUR75million), UniCredit (EUR63.5million), Atlantia (EUR51million), IMMSI (EUR10million), Pirelli (EUR10million) and Gavio (EUR2.5million). Minority shareholder, Air France-KLM, has yet to comment on the deal.

In addition, financial institutions and Alitalia's existing bank shareholders - Unicredit and Intesa San Paolo among them - will avail up to EUR598million through the financial restructuring of short and medium term debt. EUR300million of new loan facilities have also been extended by Italian financial institutions.

Completion of the equity investment remains subject to completion by Alitalia and its key private and public stakeholders of certain conditions precedent and is also subject to final regulatory approvals.

Once greenlighted, Alitalia will join Etihad's growing portfolio of investment which includes: Air Berlin (1991) (Berlin Tegel), Air Seychelles (HM, Mahé), Darwin Airline (Lugano), Air Serbia (JU, Belgrade Nikola Tesla), Virgin Australia (VA, Brisbane International), Aer Lingus (EI, Dublin International), and Jet Airways (JAI, Mumbai International).