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Etihad Is Looking to Invest in Airlines in China and the Americas

Jan 14, 2014 3:00 am

Skift Take

Etihad’s growing quasi-alliance is good for its beneficiaries who receive a boost in capital, their customers who gain access to more routes, and Etihad who drive traffic through Abu Dhabi.

— Samantha Shankman

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Kentaro Iemoto  / Flickr

Etihad Airways at Chubu International Airport. Kentaro Iemoto / Flickr


Etihad Airways PJSC, the third-largest Middle Eastern airline, said it’s looking for purchases in the Americas and China to round out its strategy of buying airline stakes that funnel traffic through its Abu Dhabi hub.

“We’ll continue to build our equity alliance,” Etihad Chief Executive Officer James Hogan said at a press conference in Berlin. “These partners allow us to stretch our network globally and they are there for the next 5, 10 and 20 years,”

Hogan has made a string of minority investments spanning Ireland to Australia and is currently in talks with Alitalia SpA, the Italian carrier that’s seeking a new international backer after Air France-KLM Group said it won’t provide fresh funds. The setup helps fill Etihad’s planes while offering its partners a much-needed equity injection and assistance in areas such as fleet renewal, where it has begun to bundle purchases.

Etihad is considering a cash contribution of about 300 million euros ($410 million) to unprofitable Alitalia, people familiar with the talks have said. Hogan declined to comment on the potential timing or size of any investment today.

The CEO said he is not interested in acquiring stakes in AirBaltic AS, LOT Polish Airlines SA or Korean Air Lines Co., and added that it’s “premature” for the company to consider raising its holding in Aer Lingus Group Plc.

“Commonality of the product is very important,” Hogan said, with Air Berlin installing the same business-class seats on Boeing Co. 787s that Etihad has specified on its Dreamliners.

Joint-Livery Jet

The carriers said they’ll expand their joint network this year and announced a common advertising campaign, showing off an Airbus A320 featuring both brand names.

Etihad two years ago boosted its stake in Air Berlin to just under 30 percent after paying 72.9 million euros, and today said it recouped that investment within six months on revenue added from joint flights and lower costs.

The carriers generated 200 million euros in sales from code-share flights in 2013, double the year-earlier amount, they said today, with Hogan adding that connectivity is the key criteria that potential allies must bring for Etihad to invest.

The pact secured Air Berlin’s survival as its equity ration was eroded by more than 600 million euros in cumulative losses in the financial years 2008 through 2011. Etihad also bought a stake in the German airline’s customer-loyalty program for 184.4 million euros and granted Air Berlin a loan line of $255 million for five years, which hasn’t yet been tapped.

Air Berlin CEO Wolfgang Prock-Schauer in November scrapped a goal of achieving an operating profit this year as efficiency measures at Europe’s No. 3 discount carrier fail to offset weaker demand. Business will remain tough as the current winter season is “always challenging,” Prock-Schauer said today.

Etihad boosted its passenger total by 16 percent to almost 12 million last year after growing its fleet to 89 planes, with code-share and equity partners delivering more than 1.8 million people onto its flights, the company said in a statement Jan. 6.

Three new equity allies were recruited — Air Serbia, previously Jat Airways, Jet Airways (India) Ltd. and Swiss regional operator Darwin Airline.

With assistance from David Tweed in Berlin. Editors: Christopher Jasper, Benedikt Kammel

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net. To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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