Etihad deal hunt hints at shifting strategy

Rumours of acquisition talks suggest Etihad is looking at new methods to win growth
Etihad deal hunt hints at shifting strategy
By Claire Ferris-Lay
Wed 19 Oct 2011 09:40 AM

Abu
Dhabi flagship carrier Etihad Airways could significantly increase its share of
the lucrative long-haul market if it acquires a stake in either Lufthansa’s
loss making BMI or Ireland’s Aer Lingus, aviation analysts said.

An ownership
stake in BMI would enable the state-backed airline to tap into European
domestic demand while a stake in Aer Lingus would offer it greater access to
the North American market.

“Etihad
tying up with Virgin to place a bid for BMI would not only strengthen their
foothold at Heathrow - where slot availability is a precious yet limited
commodity - it would also allow them to tap into yet more domestic and European
travellers that can then feed Etihad’s operations throughout the UK,” said Saj
Ahmad, a London-based aviation analyst.

“Taking
such a big stake in Aer Lingus means that Etihad would be investing for the
long term, partly with a view to perhaps overhauling the airline and also to
further integrate its business for greater access to the North America market
where its presence is relatively small,” he added.

Media
speculation about Etihad acquiring stake in a European airline has been
mounting over the last few days. The Financial Times reported Saturday that the
Abu Dhabi carrier had approached the Irish government to buy its 25 percent
stake in national airline Aer Lingus.

News of
the possible acquisition followed a day after the newspaper reported that
Etihad had held talks with Virgin Atlantic on a potential partnership should
the British airline bid for BMI.

Etihad,
in an emailed statement to Arabian Business, didn’t rule out its interest in
BMI but said: “We never comment on speculation of this nature, except to say
that we talk regularly and frequently to many airlines and a range of other
businesses from all over the world about issues and opportunities.”

Abu Dhabi-owned Etihad is ramping up its fleet as it strives
to win passengers from regional airline’s Emirates Airline and Qatar Airways.

The airline has 57 wide-body planes, with 103 jets due for
delivery in the coming decade, including 10 A380s, 25 Airbus A350s and 35 Boeing
787s.

The
acquisition of an airline would signal a new strategy for the carrier, which
has favoured route expansion and codeshare deals to underpin growth, said
Oussama Salah, a Dubai-based aviation analyst.

“This is
definitely a new strategy. Etihad is big on code share agreements with
airlines,” he said.

A
possible stake in Aer Lingus would be mutually beneficial for both the airline
and the Irish government, he said.

“An
acquisition of Aer Lingus might help Etihad get a larger share of the market or
better conditions from the Irish government that wants to sell its share to pay
for its debts.”

Etihad
would be unable to make a bid of its own for BMI due to foreign ownership rules
but a possible tie-up between Etihad and Virgin would enable the Abu Dhabi
carrier to tap into BMI’s short and medium long-haul network.

“If anything, Etihad would likely prefer going after
BMI due to the greater number of slots BMI holds than vie for Aer Lingus,” said
Ahmad.

“It makes sense that a cash-strapped Virgin
Atlantic...can leverage the financial strength of Etihad to snare BMI away from
British Airways and its parent the IAG group.”

Virgin
Atlantic and IAG, the holding company of British Airways and Spain’s Iberia,
have said they are interested in buying the carrier. Virgin’s billionaire owner
Richard Branson has been interested in purchasing BMI for more than a decade.

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