The decision came after the reigning Saudi champions suffered a 2-0 defeat against Cristiano Ronaldo-led Al-Nassr.
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"Al-Ittihad announces the termination of its contractual relationship with the first team’s head coach, Mr Laurent Blanc and his coaching staff," a statement from the club read.
According to journalist Matteo Moretto, Al-Ittihad management are considering replacing Blanc with former Barcelona star Xavi Hernandez and they reached out to the Spaniard to enquire about his availability.