Jun 05 2012
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Etihad takes acquisition route for growth
Tuesday, Jun 05, 2012
Dubai: Etihad Airways’ acquisition of stakes in certain international airlines will help the Abu Dhabi-based carrier expand its global footprint, officials and analysts say.
Etihad yesterday said it has acquired a 3.96 per cent stake in Virgin Australia, part of its growth strategy that will help the airline to catch up with its rivals in dominating the skies.
Virgin Australia’s market capitalisation at $906 million (Dh3 billion), based on its closing share price of $0.420 on Tuesday, translates the value of Etihad’s share in the Australian carrier to $35.88 million.
Most other regional carriers are pursuing organic growth — using a hub-and-spoke model to carry passengers across their network via their base that helps local tourism and associated sectors.
“By the end of this year, we will have a fleet of 71 aircraft and a group turnover exceeding $5 billion and with these partnerships, we will be in a position to grow fast.”
Although it is unclear how healthy Etihad’s cash flow is, Hogan said, the airline is funding the acquisition with its own money.
The airline became marginally profitable last year.
However, Saj Ahmad, Chief Aerospace/Airline Analyst at UK-based StrategicAero Research, told Gulf News: “Etihad clearly has the income to spend and aside from the two big buys in Air Berlin and Air Seychelles, the stakes in Aer Lingus and Virgin Australia are very conservative indeed.
“To that end, it is sustainable but equally, that sustainability will have to show some profitability and turnaround progress as well — especially for Air Berlin and Air Seychelles where the stakes are much bigger.”
Etihad, established in 2003 by Abu Dhabi government, currently serves 85 destinations across 55 countries with a fleet of 66 aircraft.
The airline will receive 100 more aircraft in the next seven years.
“That will make us a mid-size airline and even then we are not going to be the biggest regional carrier. However, with our partners, we are building a strong business model that will help us sustain growth,” Hogan said.
By Saifur Rahman Business Editor
© Gulf News 2012. All rights reserved.
© Copyright Zawya. All Rights Reserved.
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