Etihad says it’s happy with the stake in Virgin Australia it already has

Etihad Airways has confirmed its stake in Virgin Australia Holdings has now reached the 10 per cent threshold, representing 221 million shares that have been bought on the open market over recent months.

Etihad president and chief executive officer James Hogan was confident to have acquired 10 per cent in line with the permission it obtained from the Australian Government.

“We support the management strategy of Virgin Australia and will continue to work closely with them on ways to improve our business,” he said.

However, Hogan reiterated that the airline “wasn’t interested in becoming a majority shareholder or taking control of Virgin Australia.”

“Our small equity stake reflects the strong working relationship of both airlines and again demonstrates our enduring commitment to the Australian market,” he said.

Six weeks ago, Etihad received approval from Australia’s Foreign Investment Review Board, or FIRB, to increase its holding from five per cent to 10 per cent.

Saj Ahmad, chief analyst at London-based StrategicAero Research, said the Abu Dhabi carrier may not want to increase this stake. Referring to the earlier deals with Air Berlin, Aer Lingus and Air Seychelles, Ahmad said Etihad may not care too much for a controlling stake as it looks to penetrate the Australian market to exploit Virgin Australia’s growing domestic market share and deliver yet another blow to struggling incumbent Qantas.

“Of particular interest to Etihad is access to the Pacific and Tasmanian markets where Qantas has a significant presence,” Ahmad said. Either way, he said “Etihad is making some smart moves; all that’s needed now is for them to follow up that expansion with growing profitability.”

Etihad and Virgin Australia have developed a highly successful, multi-tiered partnership that includes code-sharing on flights, joint marketing initiatives and reciprocal earn-and-burn on their respective frequent flier programmes.

Hogan was confident that the equity stake would lead to more revenue generating opportunities.

“This further cements our commercial partnership as we continue to explore areas of even closer co-operation such as operational synergies, shared IT infrastructure and other forms of cost sharing efficiency.”

(c)2012 the Khaleej Times (Dubai, United Arab Emirates). Distributed by MCT Information Services.