DUBAI: Etihad Airways is in talks to divest its 40% stake in Air Seychelles, the small Indian Ocean carrier's Chief Executive Officer Remco Althius said on Wednesday.

The move would leave the Seychelles government as the sole shareholder of Air Seychelles as the Abu Dhabi carrier further unwinds its failed strategy of investing in other airlines.

"It's been formalised as we speak. It's happening right now," said Althius, a former Etihad executive, during an online event by aviation consultancy CAPA.

Etihad, which did not immediately respond to a request for comment, bought the minority stake in 2012, investing $20 million in addition to providing a $25 million loan.

The Seychelles government plans to buy the stake at a nominal value, according to a December regulatory filing.

Etihad spent billions of dollars buying minority stakes in airlines in Europe, Australia and India in a bid to catch up with state rivals Emirates of Dubai and Qatar Airways.

The strategy eventually unravelled with many airlines struggling financially, while Etihad, restricted to minority ownership, often had limited control over management.

Etihad sold its stake in small European regional carrier Darwin Airline in 2017, while minority-owned Air Berlin, Italy's Alitalia and India's Jet Airways have all gone insolvent.

Etihad is now pursuing a smaller pre-pandemic strategy to shrink its operations and focus less on connecting travel.