Meridiana will lay off hundreds of workers and cut pilot pay as a concession to Qatar Airways, which is taking an ownership stake in the struggling Italian airline.
The deal is also expected to lead to a new Doha-Milan-Chicago route, the Italian government said in a statement.
And it should soon become easier for Qatar Airways passengers to reach more destinations in Italy, such as Meridiana’s hub in Sardinia.
In February, Qatar Airways and Meridiana signed a memorandum of understanding stating that the national carrier would purchase up to 49 percent of the Italian airline for an undisclosed price.
However, the deal was conditional on Meridiana, which is owned by the Aga Khan, slashing its labor costs.
Teresa Bellanova, Italy’s deputy economic development minister, stated that 396 staff – slightly less than one-quarter of the airline’s reported 1,600 employees – would lose their jobs.
The company’s highest-paid pilots would also take a 20 percent salary cut, she added.
Meridiana is Italy’s second-largest airline and has 21 aircraft in its fleet.
Qatar Airways did not respond to a request for comment about the sale.
However, CEO Akbar Al Baker has previously warned that the Italian carrier “may go under” if it fails to receive a cash infusion.
He has also criticized the carrier’s 30-year-old McDonnell Douglas MD-80 series aircraft and suggested that Meridiana would undergo a significant expansion if Qatar Airways secured an ownership stake.
“You don’t expect me to be a substantial shareholder and fly MD-80s,” Al Baker said, according to the National.
Helping Qatar hotels
Qatar Airways would likely benefit from the investment in several ways. Meridiana could feed its domestic passengers into the Gulf airline’s international network, for example.
Financially, airlines with common owners can sometimes cut costs on ground crews and maintenance at airports where they both operate, in addition to leveraging their combined purchasing power to negotiate better deals with suppliers.
Australian trade publication Centre for Aviation (CAPA) argued earlier this year that politics likely played a role in the deal between Qatar and Meridiana and noted that the Gulf country has extensive holdings in Sardinia’s tourism sector, including several hotels.
Meridiana was founded with the goal of promoting tourism in Sardinia.
“Against this wider background of relations between Qatar and Sardinia extending well into the billions of dollars, it is a small ask between business friends for one of the world’s largest airlines … to take a small airline under its wing,” CAPA said.