Air Arabia has a history of starting joint ventures to help with its growth. The airline will be hoping this one works out better than some of Etihad's previous partnerships.
Low-cost Gulf carrier Air Arabia surged the most in over two years after announcing plans to start a new Abu Dhabi-based airline with Etihad Airways.
The new service, called Air Arabia Abu Dhabi, will cater for growing demand in the region for more affordable travel, Etihad Chief Executive Officer Tony Douglas said in a statement on Wednesday.
Air Arabia’s stock advanced as much as 5.9% in Dubai on Thursday, the biggest intraday jump in more than two years, and traded 2.2% higher at 1.39 dirhams at 12.17 p.m. in Dubai.
Etihad has abandoned an attempt to build a global network of smaller airlines after a string of failures, prompting the state-owned company to cut routes, shrink operations and slash plane orders worth $21.4 billion.
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Photo credit: An Etihad Airways aircraft. The carrier is partnering with Air Arabia to launch a new low-cost airline. Patrick Riviere / Getty Images