Etihad Airways may have stolen a march on its Gulf rivals
when it took a stake in Germany's second-biggest airline Air Berlin, obtaining
access to the German capital. But the Abu Dhabi carrier could find itself
hampered by the airline's financial troubles.
The move by eight-year-old Etihad, one of the UAE’s flag
carriers and owned by the Abu Dhabi government, is an attempt to gain scale
quickly as it bids to catch up to rivals such as Dubai government-owned
Emirates and Qatar Airways.
Last month, Etihad raised its stake in Air Berlin to nearly
30 percent from just under 3 percent, paying approximately €73m ($95m) and
lending the carrier $255m. In return, Etihad received a codeshare agreement
giving it access to Air Berlin's dense European short-haul route network and to
the German capital ahead of Emirates, one of the fastest-growing carriers in
the world, which has been lobbying for years to get into Berlin.
Industry analyst Sudeep Ghai noted German ownership limits
on the industry, which require at least 50 percent of shares to be held by a
European Union carrier, mean Etihad will never gain control of decision-making
at Air Berlin.
"But taking a stake in the No. 2 carrier in Germany,
Europe's largest economy, throws down the gauntlet to Emirates as an Etihad
competitor," said Ghai, partner at London-based airline and airport consulting
firm Athena Aviation.
Under the agreement, Air Berlin's existing Dubai services
will be shifted to Etihad's homebase of Abu Dhabi.
The deal has other benefits. It could give the Abu Dhabi
carrier access to the Oneworld alliance which Air Berlin is slated to join in
2012. Oneworld, which includes British Airways , American Airlines and Hong
Kong-based Cathay Pacific, serves more than 850 airports in nearly 150
Emirates has been pushing to get landing slots in Berlin and
Stuttgart in addition to four other destinations it flies to in Germany, but
German officials have rebuffed its requests amid resistance from local
"This is frustrating for Emirates," said John
Strickland, director of UK-based JLS Consulting. "Emirates is already in
Germany in a big way but this deal could make negotiations with Berlin more
difficult for Emirates."
Emirates is not part of an airline alliance, preferring to
forge its own way. It sold its only stake in another airline, Sri Lankan, back
to the operator in 2010. Its growth strategy is to push aggressively into new
markets and to this end, it has been building up a fleet of 90 Airbus A380
"The Air Berlin deal is very much a one-off. I don't
think there are other options available in case the Gulf carriers are looking
at similar routes for growth," said Peter Morris, chief economist at British
aviation consultancy Ascend.
He said the Gulf carriers are still faced with the question
of how they can attract sufficient traffic for their growth.
"Emirates would see this move as something containable.
But Etihad's growth is more of a threat to Qatar Airways," he added.
Doha-based Qatar Airways is stuck between the
well-established Emirates and the new-kid-on-the-block Etihad, in a heated
battle for the No. 2 spot in the Gulf.
The Etihad-Air Berlin deal takes to the next level the race
between the three major Gulf carriers to grab traffic in Europe. The three are
rapidly boosting route networks globally, on the strength of the Gulf's
strategic location between East and West and helpful home governments.
By contrast, most European airlines face a bumpy flight path
because of the euro zone debt crisis, which has raised fears of a recession in
Europe. Shares in European airlines dropped about 12 percent last year and
assets have become cheaper, making them more attractive for Gulf carriers
inclined to go on the prowl.
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