Etihad announces "historic" tie-up with Air France-KLM

This will see Etihad and Air France-KLM offering joint codes on destinations in Europe, the Middle East, Asia and Australia.  At the same time, Air France is announcing a new codeshare agreement with airberlin, Europe’s sixth largest airline, in which Etihad Airways holds a 29.21 per cent stake.

James Hogan, Etihad CEO said: “This deal, Etihad Airways’ 40th codeshare, marks a momentous milestone for both airline groups and offers countless opportunities to develop an unrivalled commercial relationship.

“It reflects the core elements of Etihad Airways’ 10-year master plan, driven by organic network growth, combined with the forging of strategic codeshare partnerships and minority equity investments in other airlines.

“The linking together of these three components, as we continue to strengthen our bilateral agreements, means all the pieces of our plan are coming together.”

Collectively, the two airline groups expect to carry more than 85 million passengers in 2012.

Commenting on the move, analyst Saj Ahmad said:"

"As one of the critics of Arab airline growth policy, it has finally dawned on Air France-KLM that the only way to effectively compete with its rivals is to join them. Air France-KLM has for years been underperforming, instead opting to level accusations, often unfounded, that state backed Arab airlines were distorting competition.

“The reality however, as we have seen in the wake of the Qantas-Emirates deal is that airlines can no longer afford not to entertain and partner up to GCC airlines. They have the best airplanes, the newest fuel efficient fleets, growing route networks and curry favour with the travelling public. Air France-KLM has been steadily losing market share and revenue and in many cases is losing money, even on popular routes to the Middle East, America and Asia. The deal with Etihad gives them a chance to redouble their efforts to turn around their loss making business while leveraging the benefits of Etihads expansive network.

 “Quite where this leaves rival Lufthansa is a mystery. With Qatar Airways poised to join the oneworld alliance with British Airways, Lufthansa seems to have been shut out in the cold. "

Jean–Cyril Spinetta, Air France-KLM CEO, said: “This new partnership between Air France-KLM and Etihad Airways and airberlin reflects our Group’s strategic positioning to ensure the best possible services between Europe and the rest of the world, by developing our network and airline partnerships.

"Working with Etihad Airways allows us to offer our customers a range of new attractive destinations,” Mr Spinetta added.

Initially, the agreement between Etihad Airways and Air France-KLM will see the Abu Dhabi-based carrier’s EY code placed on Air France flights between Paris Charles de Gaulle airport and Bordeaux, Copenhagen, Madrid, Nice and Toulouse.

The EY code will also be placed on KLM flights between Amsterdam and Abu Dhabi, Billund, Cardiff, Newcastle, Oslo and Stavanger.

Air France will initially place its AF code on Etihad Airways flights between Abu Dhabi and the Seychelles, the Maldives, Colombo, Dhaka, Kathmandu and Islamabad.

KLM will initially place its KL code on Etihad Airways flights between Abu Dhabi and Sydney, Melbourne, Islamabad, Colombo and Lahore.

Hogan said: “This deal enables us to further extend our global reach and now gives us a combined network of 321 destinations – the largest of any Middle East carrier.

“The agreement also opens up many new markets for our passengers in Europe and reinforces the importance of strategic commercial partnerships as one of the key enablers for accelerated growth of our network.

“Partnerships are delivering a major source of our revenue growth, by extending our network reach and putting our brand directly in front of millions of new customers. This year to date, they are providing 18 per cent of our revenues and will be a major contributor to our sustained profitability growth this year and into the future.”

The new strategic partners will work together on the proposed integration of frequent flyer programmes which includes reciprocal ‘earn-and-burn’ privileges for 1.5 million Etihad Guest members and 21 million Air France-KLM Flying Blue frequent flyers across the combined networks.

Other potential areas of co-operation include joint procurement, as well as maintenance and repair collaboration, as both carriers identify cost savings and seek to benefit from economies of scale, as Etihad Airways is doing with its other strategic partners.