Etihad becomes biggest single shareholder in airberlin and benefits from additional connections

The strategic move, announced today in Berlin by Etihad Airways Chief Executive Officer James Hogan and airberlin CEO Hartmut Mehdorn, connects the airlines’ extensive networks and frequent flyer programmes to offer travellers 239 destinations across 77 countries.

The announcement means Etihad Airways now offers guests a route network more than 80 destinations larger than that offered by any other Gulf carrier.

Hartmut Mehdorn said: “The strategic partnership with Etihad Airways opens up enormous opportunities for the future of our company.”

“This applies especially to future market development and the realisation of synergies.”

“One of the key components of the new partnership is the launch of airberlin services to Abu Dhabi, which will become our new gateway to Asia and Australia.”

“The agreement with Etihad Airways will also dramatically improve the global connectivity of our customers in Germany, Switzerland, Austria, and throughout the GCC and Middle East.”

James Hogan said the deal was one of the most important in Etihad Airways’ history: “This new partnership expands our network reach, gives us access to 33 million new passengers, and provides us with a real opportunity for global growth. Through airberlin, we gain immediate access to a broad and complementary European market, with outstanding connectivity options for customers of both airlines.”

“Our partnership strategy has been integral to our success over the past eight years, and the returns we have seen from this strategy have confirmed its value.”

“We are always looking for ways to grow and partnerships are a smart way to enhance our ability to compete on the world stage.”

“We now have a portfolio of 34 quality airline partners, but this is our first equity investment in another airline. It is a sign of our confidence in airberlin’s management and in the carrier’s potential to grow with us.”

“We expect such growth will also offer a host of additional employment opportunities, both in Europe and the United Arab Emirates.”

“Etihad Airways and the airberlin group carry a combined total of more than 40 million passengers a year, operate 233 aircraft, and employ 18,000 people. Together, the companies generate more than $9bn in revenues.”

“We estimate each airline could achieve incremental revenues of between EUR 35 million and EUR 40 million just in the first year, and we believe the partnership has enormous potential to unlock a range of efficiencies.”

Under the partnership:

• airberlin will shift its Middle East operation from Dubai to Abu Dhabi
• airberlin will operate four A330-200 flights a week between Berlin and Abu Dhabi from January 15, 2012 - with European travellers having immediate access to a total of 29 flights a week to and through Abu Dhabi from four German hubs, with a plan to increase to 42 flights from mid-April
• the airlines will implement an extensive codeshare agreement, with Etihad Airways codesharing on 36 of airberlin’s 171 destinations and airberlin codesharing on 24 of Etihad Airways’ 82 passenger destinations, and plan further expansion of the pool of codeshare routes
• Etihad Airways will sign codeshare agreements with the airberlin group for all European activities including NIKI, the Austrian airline, and Belair, the Swiss airline
• Etihad Guest and topbonus, the airlines’ frequent flyer programmes, will be integrated, enabling passengers of both airlines to ‘earn and burn’ on each other’s flights and offering reciprocal benefits - including status earning - to top tier members

Under the agreement, Etihad Airways will have two seats on the Board of Directors of the Air Berlin PLC.

The two companies will seek anti-trust immunity, which would allow greater coordination of route networks and of sales and marketing activities.

Airberlin and Etihad Airways are committed to creating a joint procurement taskforce to look for cost efficiencies across the two companies, including areas such as fleet procurement and deployment, maintenance, repair and overhaul (MRO) and general procurement.

Etihad Airways’ minority stake will consist of 27.03% from a new share issue by airberlin, funded from operational cash flow and an existing interest of 2.99% (pre-dilution), which will amount to a total interest of 29.21%. The new shares will be issued at a price of EUR 2.31.

The announcement means Etihad Airways now offers guests a route network more than 80 destinations larger than that offered by any other Gulf carrier.

As part of its deal with airberlin, Etihad Airways will sign codeshare agreements with the airberlin group for all European activities including NIKI, the Austrian airline and Belair, the Swiss airline.

Hogan said: “Today more than ever, it is vital to think differently in this industry. The number of codeshare partners Etihad Airways has, and the number of destinations it is now able to serve, is a point of marked differentiation.

Aviation analyst Saj Ahmad said: "The wide-ranging partnership and stake in Air Berlin give Etihad a great opportunity to expand its in Europe without the need to seek new slots and it allows them to utilise Air Berlin's status as a major European player to capture traffic that comes both to the GCC region and for onward travel to other destinations that can be served via Etihads existing route network, especially to places like Australia.
 
Equally, the deal could eventually allow Etihad to ponder joining the oneworld alliance of whom Air Berlin is a key member - while there's no rush to do this, expanding Etihads co-operation with an alliance member, and one whose foothold is in Europe gives the UAE carrier greater access to other airlines who also interline with Air Berlin and gives them the option to deepen its relationship with airlines who have agreements with the German airline.
 
It's clear that Etihads investment, however sizeable it appears, is one for the long term. The capital infusion for fleet requirements and the expansive capability for both it and Air Berlin to code share and offer customers increased choice and travel flexibility will be key to this partnership yielding success. On the back of Etihads recent order for more 787s and with Air Berlin also looking to revamp its fleet in the coming years, the benefits of this partnership may not be seen immediately, but over time, it is one that will certainly make rivals in the GCC sit up and take note. Whether we see other Arabian airlines looking to do the same remains to be seen but if Etihad and Air Berlin deliver increased synergies and grow passenger numbers across their networks, then there's a very good chance that investment in European airlines by Arab carriers could well be the next stepping stone for them to increase their presence and access into Europe."
 
 

“The Gulf is increasingly the centre of the world in terms of aviation, and we are happy that with one booking we are able, either directly or with codeshare partners, to allow our guests to take full advantage of this geography. 

“We will continue to look to strike codeshare agreements with carriers around the world where we feel it is to the advantage of our guests.”