Alitalia has reached agreement with Etihad Airways on a deal that would give the Middle Eastern group a 49 per cent stake and stave off a second bankruptcy for the Italian flag carrier.

In a joint statement on Wednesday, the companies said they had agreed “principal terms” on a transaction, though no financial terms were disclosed. The stake in lossmaking Alitalia, which almost went bankrupt before being bailed out by the government last year, is thought to be worth about 560 million euros.

The deal, if successful, would give Alitalia a much-needed financial boost as well as broaden Etihad’s ambitious plans for a new global alliance of airlines in Europe and the Asia-Pacific region.

But the move is set to face regulatory hurdles in Brussels, coming amid heightened scrutiny of non-EU carriers investing in European airlines. In April the European Commission launched an inquiry into stakes held by foreign investors in four European airlines — including Etihad’s 29 per cent shareholding in Air Berlin.

Alitalia and Etihad said in their statement: “The airlines will now move to finalise the transactional documents, that will include the agreed upon conditions, as soon as possible.”

Those conditions have been a continual sticking point for the Etihad deal — including plans to cut up to a quarter of the Italian carrier’s 12,000 staff. The company declined to comment on any job cuts or whether two shareholders, Italian banks Intesa Sanpaolo and UniCredit, would write off some debt and swap the rest for equity.

Alitalia was forced to seek a partnership with Etihad after talks with Air France-KLM stalled over cost cuts and how to deal with the Italian airline’s debt load. The carrier has been making losses for years and is in the process of cutting thousands of jobs as its domestic market comes under attack from low-cost carriers and global operators including Emirates, which services Milan.

Etihad’s investment forms part of a plan by chief executive James Hogan to assemble a challenger alliance to the three existing global networks — Oneworld, Star and SkyTeam.

The airline wants to use code-shares and equity stakes to drive traffic through Abu Dhabi, where a new terminal is scheduled to open in 2017.

As well as Air Berlin, the Abu Dhabi-based group has stakes in Air Seychelles, Aer Lingus, Virgin Australia, India’s Jet Airways and Air Serbia.

— Financial Times