UAE national carrier Etihad is negotiating a closer alliance with Malaysia Airlines, according to aviation analysts, but has denied it is eying an equity stake in the ailing Asian airline.
Etihad CEO James Hogan initiated a meeting with his Malaysian counterpart Jauhari Yahya prior to the International Air Transport Association (IATA) annual general meeting in Doha on June 1, Asia Pacific-based analysts CAPA said.
The Asian carrier is interested in deeper partnerships as it faces a possible restructure amid growing losses, while Etihad has a track record of buying stakes in ailing carriers.
“An MAS-Etihad partnership would be logical for both carriers and have repercussions in the dynamic Southeast Asian marketplace,” a CAPA report says.
“MAS [Malaysia Airlines] would initially forge a comprehensive codeshare partnership with Etihad, building on the limited code-sharing the carriers already have in place. But with Etihad an equity stake is also always a possibility.”
However, an Etihad statement on Thursday ruled out any plans to take a stake in the ailing Asian airline. "Etihad Airways would like to confirm that it is not in talks with Malaysia Airlines about the possibility of an equity investment in the carrier," it said in a statement.
Shares of Malaysian Airline System Bhd rose the most in more than a year on Wednesday following a media report that the loss-making national carrier was in talks with the Abu Dhabi carrier.
Qatar Airways could possibly come to the table, with MAS talking to co-members of the oneworld alliance, including Qatar, CAPA said.
MAS reported a MYR443m ($134m) loss during the first quarter of 2014 on the back of significant downturn in demand, particularly from China, following the disappearance of flight MH370, with more than 200 people on board. The plane still has not been found.
It already has started restructuring but CAPA said changes were not deep enough to help the airline return to profit.
Any deal with another airline would have to be approved by the Malaysian government, which owns a majority stake in MAS.
A closer tie-up would give Etihad greater reach into Southeast Asia, which presently accounts for about 15 percent of its seat capacity, with only six destinations, according to CAPA.
A code-share agreement also could include destinations in Australia, MAS’ biggest single market.
CAPA said Qatar could be more appealing to MAS because it has a larger network in Europe, the Middle East and Africa.
However, Etihad has numerous close partners in Europe that MAS could potentially also tap into.