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14th April, 2014.
Etihad Airways headquarters, Abu Dhabi.

Etihad closer to buying almost half of Alitalia

The prospect of Etihad Airways buying nearly half of Alitalia has significantly increased after a meeting between Etihad's boss and Italy's prime minister, and disagreements over job cuts may be overcome, said a source with knowledge of the talks.

Loss-making Alitalia was kept afloat by a government-engineered 500 million euro ($694 million) rescue package last year. But it needs to find a cash-rich partner quickly to revamp its flight network or else risk having to ground its planes.

Abu Dhabi-based Etihad has been looking at Alitalia's books for a possible investment since the start of the year. But the prospect of large job cuts at Alitalia and the airline's debt of at least 800 million euros had been major hurdles in the talks.

The source with knowledge of the talks between Etihad CEO James Hogan and Prime Minister Matteo Renzi late on Thursday at the premier's office said Etihad was considering investing up to 500 million euros in Alitalia and was inching towards an offer.

Out of that investment, 350 million would be for a 49 percent stake in the Italian airline, the source added.

"The letter of intent (from Etihad) will arrive within a few days," the source told Reuters on Friday. "Etihad is not coming in to patch things up but to change the whole face of Alitalia which will become a five-star airline."

One of the conditions put forward by the Gulf airline is for 2,000 job cuts out of Alitalia's 14,000-strong workforce, the source said. This is much lower than cuts of up to 7,000 staff reported in the Italian press.

The source said the Italian government believed Etihad's demands on the jobs front were not insurmountable.

Alitalia has called a board meeting for Monday at which Etihad's proposals are likely to be discussed, another source close to the situation said.

Source: REUTERS

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