Tuesday, Dec 20, 2011


 
   By Doug Cameron 
   Of DOW JONES NEWSWIRES

Etihad Airways is seeking antitrust immunity from regulators for its planned tie with Germany's Air Berlin PLC (AB1.XE), a first for one of the three big Gulf carriers that promises to increase their already-outsized influence on the global airline industry.

The parallel equity investment in Air Berlin by Etihad also marks a departure from the rapid standalone expansion of long-haul, intercontinental services that has seen the Abu Dhabi-based carrier and its larger near-neighbors -- Emirates Airline and Qatar Airways -- attract millions of passengers, and a horde of industry critics and admirers.

The deal also gives the melting pot of global alliances another stir, with some observers viewing the Air Berlin investment as the first step towards Etihad joining one of the three big global groupings -- Oneworld, Star and SkyTeam -- that account for three-quarters of all airline passengers.

Linking its network with that of Air Berlin, Europe's third-largest discount carrier after Ryanair Holdings PLC (RYA.DB, RYAAY) and easyJet PLC (EZJ.LN, ESYJY), is a coup for Etihad. Dubai-based Emirates has struggled to expand services to Germany, blocked by the German government's reluctance to boost access for a company seen as receiving unfair government subsidies.

Etihad -- which has yet to turn a profit -- and Qatar Airways have faced similar charges of government largesse, and vehemently deny any such support.

The application for immunity to coordinate flights, fares and marketing with Air Berlin will shine a regulatory spotlight on the claims and counterclaims about government support for the big three Gulf carriers.

Deutsche Lufthansa AG (DLA.XE) has been among the fiercest critics of the Gulf carriers, portraying their huge aircraft orders books as dumping unwelcome and subsidized capacity into markets.

Regulators in Brussels can be expected to take a more dispassionate view.

Etihad already has a freshly-inked alliance partner in Asia, in the form of

Virgin Australia Ltd. (VBA.AU), and the tie with Air Berlin -- which is due to join the Oneworld alliance early next year -- will help funnel east-west traffic through its Abu Dhabi hub.

Virgin Australia also has a pact with SkyTeam member Delta Air Lines Inc. (DAL) that finally secured antitrust approval from regulators, and during the summer agreed a pact with Singapore Airlines Ltd. (C6L.SG), a member of the rival Star grouping.

Emirates and Qatar have avoided flocking to one of the global alliances, claiming they see no strategic or financial benefits. Etihad, by far the smallest of the trio, has made no secret of its interest in joining at some point in the future, according to people familiar with the situation. The airline wasn't immediately available for comment, while Air Berlin said the new pact was independent of any alliance developments.

Industry observers said Etihad has seen a direct investment in an alliance member as one way to joining one of the groupings.

While the Gulf trio is linked to just about every airline up for sale, their forays to date have been limited. Emirates, for example, last year sold its minority stake in Sri Lankan Airlines.

Etihad is a quarter the size of Emirates and half the size of Qatar Airways, which earlier this year acquired a minority stake in Cargolux International Airlines SA, one of the world' largest all-freight carriers.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

(END) Dow Jones Newswires

20-12-11 0357GMT