It's no secret that Italian flag carrier Alitalia has been in trouble over the past several years. But the latest move by a Middle Eastern airline could make Alitalia's prospects far more certain. I'll take a look at the current situation and what it means for other European and North American airlines.

Rough flight
Despite having a major role in the lucrative Italian tourism market, Alitalia has rarely been a profitable airline, having received cash injections from the Italian government and going through a reorganization in 2008.

The Alitalia cash crisis reached a breaking point a few months ago as the airline's poor financial situation caused its fuel supplier Eni (E 0.61%) to threaten to cut off Alitalia's fuel supply unless the Italian carrier could show a stronger outlook. Rebuffed by partner airline and then-25% shareholder Air France-KLM (AFRAF -0.28%), an emergency rights issue was organized. Seeing as Alitalia still refused to change its business to meet Air France-KLM's demands, the Franco-Dutch carrier declined to exercise its rights, saw its stake in Alitalia significantly diluted, and wrote off the entire value of the Alitalia stake.

A new partner
Even after a long history as a partner airline, Air France-KLM refused to inject more capital into Alitalia unless the latter agreed to more of Air France-KLM's restructuring measures. Since the rights issue was a temporary measure and not meant to be a permanent fix, Alitalia sought a new partner airline and it appears to have found one.

Abu Dhabi carrier Etihad Airways is reported to be on the verge of injecting 300 million euros of capital into Alitalia. Alitalia could certainly use the money -- it is similar in size to the entire rights issue. And Etihad looks poised to benefit as well. The partnership would give Etihad a stronger European presence as Middle Eastern carriers gear up for greater expansion.

Alitalia's structure
Although a deal with Alitalia gives Etihad a greater European presence, the benefits to Etihad and the outlook for Alitalia come down to what deal Etihad was able to extract. Air France-KLM declined to inject additional capital over disagreements surrounding Alitalia's cost structure and Alitalia was also turned down by Russian airline Aeroflot and Qatar Airways, another Middle Eastern airline looking for expansion opportunities.

It is also unclear what Alitalia's future in the world of airline alliances will be. Currently, Alitalia is a member of SkyTeam, which includes Air France-KLM and Delta Air Lines (DAL 4.05%) among its members. This alliance has allowed Air France-KLM and Delta to book passengers on Alitalia flights and better access the Italian tourism market.

But Etihad Airways is not a member of any of the three largest airline alliances, instead foraging its own agreements with airlines from multiple alliances. Because Etihad had already created agreements with airlines, including Air France-KLM, in SkyTeam, Star Alliance, and OneWorld, it would be tough to see Etihad removing Alitalia from SkyTeam unless it wanted to take a significantly more hands-on approach. Rather, the Alitalia deal may be a way for Etihad to gather greater influence within SkyTeam despite not being a member.

What is unclear is whether Etihad will share parts of Alitalia with its own partners from other alliances. Being a member of the OneWorld alliance, American Airlines (AAL 1.51%) has not had the same Italian network access as SkyTeam members like Delta Air Lines. While SkyTeam should be expected to maintain a large degree of access to Alitalia's network, assuming Alitalia remains a SkyTeam member, there is a possibility Etihad could allow greater access for its partner airlines including American Airlines, depending on how the final deal is structured.

Outlook
Etihad has a record for crossing between alliances to form partnerships so it's unlikely that Etihad would remove Alitalia from SkyTeam. Because of this, access to the Italian market looks to remain largely intact for other SkyTeam members including Air France-KLM and Delta. Additionally, opportunities may exist for American Airlines through its partnership with Etihad but this remains only speculation at this point. The recent rights issue averted the need for Eni to cut Alitalia's fuel supply and a successful capital injection from Etihad would provide more certainty to Alitalia's ability to pay Eni in the future.

In the end, Air France-KLM and Delta want a stable Alitalia that can continue to provide route access without needing additional capital injections. If Etihad does have a way to either constantly inject fresh capital into Alitalia (negating the need for Air France-KLM to do so) or make the Italian carrier financially sustainable in the long term, it should be seen as a positive for other SkyTeam members.