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Etihad Airways to grow equity investment model

Etihad Airways to grow equity investment model Etihad president James Hogan was speaking in Germany

Etihad Airways has foreshadowed more investments in other airlines, as it continues to increase its global presence through a mix of organic growth and strategic partnerships.

James Hogan, the airline’s president and chief executive officer, said the airline was currently engaged in three major transactions – the acquisition of 24 per cent of India’s Jet Airways, a 49 per cent stake and management contract in Air Serbia, and increasing equity in Virgin Australia from ten per cent to a target of 19.9 per cent.

“Global reach is beyond the capacity of any single airline,” Hogan said at a conference in Cologne, “and progress must come through partnership.

“The investments we are making are delivering significant benefits not only to the airlines but to our passengers and freight customers.

“We will consider more strategic partnerships if they add value.”

Etihad Airways launched its equity investment strategy in 2011 with the purchase of a 29 per cent stake in airberlin, followed by a 40 per cent investment in Air Seychelles, which included a five year management contract.

This was followed last year by the investment in Virgin Australia and a three per cent stake in Ireland’s Aer Lingus, this year’s Air Serbia deal and, subject to final approval, the Jet Airways investment.

Together, Etihad Airways and these six airlines serve more than 340 destinations with a fleet of 511 aircraft.

They carried a combined total in 2012 of more than 91 million passengers – comparable to large airline partnerships in Europe and Asia.

“Equity investments deliver synergy benefits which cannot be achieved through legacy airline alliances,” Hogan added.

“Legacy alliances are focused largely on network and revenue benefits.

“Our equity alliance delivers much broader benefits for all of the partners including opportunities to reduce costs through resource sharing and joint procurement.”

Hogan said the foundation investment in airberlin had delivered significant gains to both carriers, with more than 260,000 passengers flying on their combined networks in the first half of 2013 - more than four times higher than the first half of 2012.
Etihad Airways now codeshares on 61 airberlin routes, while airberlin codeshares on 31 routes of Etihad Airways.

Together, the airlines operate 42 flights each week between Abu Dhabi and four German cities – Frankfurt and Dusseldorf (both airlines), Munich (Etihad Airways), and Berlin (airberlin).

The Etihad Guest and airberlin Topbonus loyalty programmes have been integrated to enable passengers on both carriers to earn and redeem mileage points on either airline.

And both airlines have agreed to identical interiors, engines and a joint implementation programme for their new Boeing 787-9 aircraft, the first of which will enter service in 2014.

“Our equity alliance is a new business model for the airline industry,” Hogan concluded.