Tuesday, Jun 05, 2012

Dubai

Etihad, the UAE flag carrier, has confirmed acquiring a 3.96 per cent stake in Virgin Australia, part of its growth strategy that will help the Abu Dhabi-based airline to catch up with its rivals in domnating the skies.

The airline has been quietly buying shares on the open market for some times. “The stake has been built over recent weeks, through purchases on the open market,” the airline said in an e-mailed statement.

This is the fourth major acquisition announced by the Abu-Dhabi-based airline in six months, following its acquisition of a 30 per cent stake in AirBerlin in December 2011, followed by a 40 per cent stake in Air Seychelles announced in February and a 3 per cent stake in Aer Lingus announced more recently.

“Etihad Airways believes that this equity investment in Virgin Australia’s domestic operations significantly strengthens the 10-year strategic partnership forged by the two carriers in August 2010 and will enrich the commercial benefits which the alliance already provides for both airlines as well as increasing the benefits to Australian consumers and visitors to Australia.”

Etihad did not say whether it intended to increase its stake further. Virgin Australia recently completed a restructure that helped it get around Australian foreign ownership laws that limited offshore investment in the company to 49 per cent.

“Etihad’s strategy of buying up shares in partner airlines to boost ties as well as its presence it key markets, such as Australia, appears to be the catalyst behind their small, but incisive stake in Virgin Australia,” Saj Ahmad, Chief Aerospace/Airline Analyst at StrategicAero Research, told Gulf News.

“Just days ago the two airlines agreed a wet lease deal on a 777-300ER to supplement Etihads flights so in a way, this news isn’t that much of a surprise, particularly when you look at the stakes bought in Air Berlin, Air Seychelles and Aer Lingus.”

Formerly known as Virgin Blue, the airline was launched in 2000. Richard Branson’s Virgin Group owns 26 per cent of Virgin Australia, and Air New Zealand, which also has an alliance with the airline.

The move appears to be part of a wider Etihad effort to seek stakes in overseas carriers to gain a possible edge over its regional and international rivals. It did not disclose how much it paid for the shares.

Etihad Airways’ President and chief executive James Hogan earlier told Gulf News, that acquisition and partnerships would be part his airline’s growth strategy.

“We will continue to pursue growth opportunities built on partnerships and acquisition that suits our strategy, in addition with organic growth,” he said.

The eight and a half-year-old airline, which is growing fast organically, has also taken the acquisition route as part of its growth strategy to reach out to more destinations and passengers worldwide. Etihad Airways, launched by Abu Dhabi Government, has become profitable last year - for the first time. The airline has a fleet of 66 aircraft serving 85 destinations across 55 countries.

“What is interesting is that Qantas will be watching with interest,” says Ahmad. “This deal effectively gives Etihad access to the domestic market in Australia that Qantas needs - any siphoning off of traffic here will hurt them immensely while boosting Etihads traffic feed as well as that of Virgin Australia.

“There’s no guarantee, if any, that Qantas or its offshoot Jetstar will have seen this coming and they have little choice but to be worried if this stake were to grow.”

This will also help Etihad to increase passenger traffic to Abu Dhabi city where the government is constructing the Midfield Terminal Complex (MTC) - a Dh11 billion project that is part of a Dh25 billion redevelopment and expansion of Abu Dhabi International Airport.

“Together, Etihad Airways (21) and Virgin Australia (3) operate 24 flights a week between Abu Dhabi and Australia and passengers have access to a combined network of more than 150 destinations,” the airline said.

Last month Etihad Airways leased a Virgin Australia Boeing 777-300ER for use on its route between Abu Dhabi and Kuala Lumpur.

Etihad Airways began flying to Australia in March, 2007 when it launched services to Sydney. Melbourne and Brisbane were quickly added. Nearly 2.2 million passengers have been carried between Abu Dhabi and these three cities in the last five years.

Etihad Airways has strategic codeshare partnerships with 35 airlines around the world.

By Saifur Rahman Business Editor

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