Etihad Airways (EY, Abu Dhabi International) has outlined its business restructuring plans for its latest equity partner, Alitalia (AZA, Rome Fiumicino), in which it is set to acquire a 49% stake. With the signing of a transaction implementation agreement, which will result in EUR1.758billion (USD2.357billion) being invested into the airline, Etihad said it hopes to see a recapitalized Alitalia return to profitability by 2017.

"For Etihad Airways, this is a strategic, long-term commercial investment. 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," Etihad Airways President and CEO, James Hogan, said.

Among Etihad's plans for the Italian carrier are a greater focus on long-haul routes from Rome Fiumicino and Milan Malpensa, a revitalized brand, and a greater focus on Italian tourism and trade promotion.

"Rome Fiumicino will emerge as a larger European intercontinental hub, with up to five new routes over the next four years, while long-haul flights from Milan Malpensa will more than double to 25 flights a week by 2018," Etihad said adding that Alitalia's widebody fleet will be increased by 32 per cent, while the number of narrow-body aircraft will be cut by 13 per cent.

Initial changes to Alitalia's schedule will begin this year when, starting from Winter 2014, it will increase its service between Rome Fiumicino and Abu Dhabi International from 5x weekly to daily while also commencing a new daily Milan Malpensa to Abu Dhabi flight. Then, from Summer 2015, Alitalia will begin to offer connections to Abu Dhabi from other Italian cities such as Venice Marco Polo, Catania and Bologna.

In terms of trade expansion, Etihad will relaunch and expand Alitalia's defunct freight subsidiary, Alitalia Cargo, in order to exploit Italy's position as Europe's third largest cargo market. Along with the establishment of a centre of excellence in Northern Italy, investment will also be made into upgrading handling capabilities at Italian airports while establishing an integrated cargo network.

Etihad's acquisition of a 49% stake in Alitalia for EUR387.5million will also allow the Italian carrier to streamline its costs through access to Etihad's hub operations and joint-procurement in the areas of aircraft, engines, MRO, training, catering, ground-handling and fuel.

The partnership will also pave the way for the redesigning and automation of processes and working arrangements in line with best practice, and the adoption of improved IT platforms.