The two airlines said in a joint statement that Etihad Airways confirmed that it will send a letter detailing conditions for a proposed equity investment. Negotiations have lasted for months. It quoted Etihad Airways CEO James Hogan as saying "we are delighted to be able to move forward with this process" and look forward to its successful conclusion.
Italian Transport Minister Maurizio Lupi told Italy's state RaiNews in an interview that Etihad's investment could amount to about 600 million euros (about $820 million), and would revitalize Rome's Fiumicino and Milan's Malpensa airports.
Italian news reports have said a deal would likely see banks renegotiating more than 500 million euros ($700 million) in debt, canceling some and converting the rest into shares. Italian unions might resist layoffs that likely could figure in any deal.
Lupi said it could take a month before a final deal is spelled out in every detail.
Any accord would also have to convince European Union authorities it doesn't violate competition rules.