Friday, Dec 06, 2013

Dubai: Etihad Airways continues to expand by acquiring equity stakes in foreign airlines. Last month the company added two more airlines to its profile with a 33.3 per cent stake in Darwin Airlines, followed by the long-awaited approval of a 24 per cent stake in Jet Airways.

So, which markets are next for Etihad’s equity stake strategy? Today, the airline has stakes in four European carriers (Air Serbia, Air Berlin, Aer Lingus, Darwin Airlines) and a stake in carriers in Australia (Virgin Australia), India (Jet Airways) and the Seychelles (Air Seychelles).

One market to watch is the US, where Etihad and the other big Gulf carriers have signalled their interest. Etihad already flies to Chicago, New York and Washington DC and from next year will fly direct to Los Angeles.

But an equity stake might not be key to Etihad’s growth in North America because the big four US carriers — American, Delta, United and Southwest — would be ‘unlikely to entertain’ such a deal, Ernest Arvai, a US-based aviation consultant and CEO of The Arvai Group, told Gulf News in an emailed statement.

“The key [for growth] will be open-skies agreements between the UAE and US, which are one sided [because] the US has multiple potential international destinations versus only two in the UAE, that are quite close together,” Arvai said.

Landing rights

Expansion by Etihad and the other major Gulf carriers, Emirates and Qatar Airways, has previously faced stiff opposition from US airlines and groups such as the Airline Pilots Association. In October the Wall Street Journal reported Jeff Smisek, chief executive of United, as saying that the Gulf States had out-traded the US negotiators on landing rights.

An Etihad Airways spokesperson told Gulf News in an emailed statement that the US was a key market with the airline forecasting future growth.

“The airline has carried nearly two million passengers between Abu Dhabi and its destinations in the US in the last seven years, with 2013 passenger volumes expected to increase by 30 per cent over passengers carried in 2012,” the spokesperson said.

While, according to Arvai, Etihad is unlikely to strike a deal with one of the big four — at least in the immediate future — it does maintain a codesharing agreement with American Airlines connecting Etihad passengers to a number of destinations throughout the US.

Arvai said it was more likely one of the smaller US carriers would jump to a deal from Etihad. He said Virgin America “could provide connecting service to gateways and is service oriented,” fitting with the Etihad product.

Access to domestic markets

So far, Etihad has used its equity stakes to enhance its access to domestic markets. Its partnership with Virgin Australia, for example, gives it access to destinations in Australia that are not traditionally served by international carriers.

Despite not holding an equity stake in any US airlines, Etihad has been able to connect its passengers through a codeshare agreement with American Airlines. The Etihad spokesperson said the codeshare has proven to be ‘hugely successful’ since it was launched in September 2009.

But looking at a possible equity stake for Etihad in the North American market, Arvai said JetBlue or Alaska Airlines could be attractive. However, he points out that with Lufthansa holding a stake in JetBlue meant the possibility for Etihad is unlikely.

In the past Lufthansa has been a staunch opponent of Gulf carriers. While Alaska Airlines has proven a good fit with several major carriers, Arvai said an Etihad tie-up was unlikely ‘except in a defensive move’.

By Alexander Cornwell Staff Reporter

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