UAE's Etihad eyes partnerships in South America - Hogan

Exclusive: More routes into the US and Canada are also part of its wider expansion into the Americas
Etihad Airways CEO James Hogan.
By Shane McGinley
Thu 07 Nov 2013 09:36 AM

Etihad Airways is looking to South America as its new focus for potential partnerships, part of the Abu Dhabi-based airline's wider bid to boost its presence in the Americas, CEO James Hogan told Arabian Business.

The UAE flag carrier’s only South American route at present is Sao Paulo in Brazil, but Hogan is looking to rectify this in the near future. “South America is a huge continent and we will continue step by step to develop our presence,” he said.

While Hogan has not ruled out seeking a possible equity partner in Latin America, a codesharing agreement seems the most likely avenue at present: “As I have always said, we look at equity partnership as a commercial opportunity and an investment opportunity. [What] we are certainly looking at in South America is codesharing relationships.”

Should Etihad decide to go down the equity route in South America, Saj Ahmad, an aviation analyst at London-based StrategicAero Research, said loss-making carriers such as Brazil’s Gol and Buenos Aires-based Aerolineas Argentina would be the most likely possible candidates.

Last month, Etihad announced plans to start direct daily flights to Los Angeles, which will be the carrier's fourth US destination when the service starts in June 2014. “We would like to do more in the Americas, we have just launched Los Angeles and we are probably looking at another destination in America for next year,” Hogan said.

While the airline looks at potential codesharing agreements in South America, some analysts have expressed concerns about the long-term outlook of its existing codesharing partnership with American Airlines.

The massive American carrier, which filed for Chapter 11 bankruptcy protection in 2011 and in February announced plans to merge with rival US Airways, is a key player in the oneworld aviation alliance, which Qatar Airways has just joined. In addition, another big member - Qantas – signed a groundbreaking partnership with Emirates earlier this year.

“Etihad has a vital (for Etihad) and extensive codeshare arrangement with American… It strains credibility that American could have a deep and meaningful relationship with all three: Emirates, Etihad and Qatar. Alliance promiscuity can only go so far before conflict arises; but today's question perhaps becomes more about how to manage that conflict rather than how to avoid it,” analysts at CAPA observed.

However, Etihad’s recent $335 million acquisition of a 24 percent stake in India’s Jet Airways could be the trump card in guaranteeing its long-term partnership with American. The UAE government’s ongoing talks to get US visa pre-clearance at Abu Dhabi airport also makes it even more attractive.

“Until the Jet Airways purchase – and an extremely important Abu Dhabi US pre-clearance agreement – Etihad looked like an easy call for American to walk away from. Not anymore,” the CAPA report said.

“The combination of easy US passenger access and a much stronger hold on the large and growing Indian market not only makes Etihad much more attractive for American, but also Abu Dhabi soars as a desirable transfer point. In this respect, there are few better holistic examples of airline-airport-government policy working together,” it added.

The expansion into India, which this summer saw Etihad more than triple the number of seats it offers on the prime routes to Mumbai and New Delhi, will also help smooth its plans to expand further into Canada.

Toronto is currently the airline’s only route in Canada and Hogan is aiming to improve this, with the Indian trump card one again proving useful.

The UAE and Canada have had a long running diplomatic spat over the Ottawa government’s reluctance to allow Emirati carriers more landing rights in Canadian cities, mainly out of a protectionist policy towards national carrier Air Canada.

However, relations seem to be thawing as in April Etihad announced it would partner with Air Canada in a new codeshare agreement, just days after the UAE reinstated a visa waiver for Canadian citizens.

"On the back of UAE normalising the visa rules with Canada, (the codeshare agreement) gives us the opportunity to sell beyond Toronto to the other Canadian cities," Hogan said at the time.

“Here again the magic of the virtuous circle may come into play,"  CAPA said in its report, "Once Etihad/Jet is able to deliver high levels of traffic from 23 points in India, the proposition for Air Canada to become more intimate with Etihad becomes very powerful. Currently, Air Canada does not serve the large Indian market non-stop, preferring to codeshare on – once again, the virtuous circle – Jet Airways over London."

So are we likely to see any equity partners in the Americas? “I think we have enough on our plate at the moment,” Hogan said in relation to whether executives were currently in talks regarding any new equity deals.

“We are on six continents of the world today. No airline has ever grown as fast as we have. It is step by step,” he said.

Etihad currently has stakes in Air Berlin, Ireland’s Aer Lingus, Air Serbia, Virgin Australia, Air Seychelles and India’s Jet Airways.

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