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Fri 16 Dec 2016 02:31 PM

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Etihad, Lufthansa set for further alliances following codeshare agreement

Etihad's James Hogan, Lufthansa's Carsten Spohr signal extending the airlines' cooperation in 'other areas' following historic codeshare agreement

Etihad, Lufthansa set for further alliances following codeshare agreement
James Hogan, president and CEO, Etihad Aviation Group

Etihad Airways and Lufthansa have signed a codeshare agreement that could herald further partnership growth between the two national carriers.

In what is seen as the potential start of a growing relationship between the two airlines, Etihad and Lufthansa have agreed to codeshare on the UAE carrier’s twice-daily flights between its home base of Abu Dhabi and Frankfurt, and its twice daily services between Abu Dhabi and Munich, a statement from the airlines says.

Etihad will also codeshare on Lufthansa’s intercontinental services between its home base of Frankfurt and Rio de Janeiro, Brazil, as well as Bogota, Colombia.

The codeshare arrangement is set to start in January 2017, subject to government approval.

The airlines also confirmed the previously announced agreement that Lufthansa will lease 38 aircraft from Air Berlin - in which Etihad Aviation Group indirectly holds a 29 percent stake – for its point-to-point carrier Eurowings and its network carrier Austrian Airlines.

Both companies have signalled that the codeshare agreement is the start of a growing relationship between the one-time rivals.

“We have long seen Germany as a key strategic market for Etihad Aviation Group and this new relationship with Lufthansa marks the next step in our commitment to the leading European aviation group,” said James Hogan, president and CEO, Etihad Aviation Group.

“Lufthansa is highly respected globally and I’m very pleased that we will work together in the future for the benefit of our customers.

“It is very clear to us at Etihad Airways that Lufthansa is a like-minded, forward thinking organisation with which we can do strong, meaningful and mutually beneficial business.”

Carsten Spohr, CEO of Lufthansa Group, who has previously been very vocal about the Gulf carriers’ growth into Europe, said the codeshare deal and wet-lease contract could be the first in a series of alliances between the two carriers.

“We are looking forward to partnering with the Etihad Aviation Group. The wet-lease contract with Air Berlin fosters the growth of our Eurowings Group,” he said.

“The codeshare agreement of Lufthansa and Etihad will offer our customers more benefits and complement both airlines’ networks.

“We will consider extending our cooperation in other areas,” he added, without elaborating further.

The agreement marks a significant change in the relationship between the German carrier and one of the Gulf carriers it had previously been critical of about its growth in Europe.

Two years ago, the previous CEO of Lufthansa Christoph Franz, warned of the threat posed by Gulf airlines, and not long after his appointment, Spohr said the three carriers were not operating on “level playing field”.

That opinion appeared to have cooled since then, however, with Germany’s Economy Ministry state secretary Brigitte Zypries suggesting earlier this summer that Lufthansa would be better off becoming a partner with a Gulf airline rather than fighting them.

Etihad and Lufthansa had twice previously agreed to a codeshare agreement, before the German carrier to walk away, Hogan told Arabian Business two years ago.

It marks a significant step for the Etihad boss to finally tie-up a deal and to establish a partnership with Europe’s biggest carrier.

The agreement follows on a deal to create a new leisure airline TUIfly with Europe's largest tour operator TUI Group, the latest in a series of significant deals Etihad has signed to strengthen its position in Europe, where it already has equity stakes in Alitalia, Air Serbia, Etihad Regional and Air Berlin.

The new airline venture is part of a wide-ranging restructuring plan at Air Berlin, which is battling to stem losses.

While many may have seen Etihad’s investment in Air Berlin as largely unsuccessful to date, given it has made a net loss in almost every year since 2008, Etihad Group says the partnership has been extremely positive, injecting $630m into the Abu Dhabi economy through the 80-odd codeshares it has with the German carrier.

“Even with an investment such as Air Berlin, where it has taken longer than expected for the airline to reach sustainable profitability, we are seeing incredibly strong returns directly into our business, far in excess of our original expectations,” Hogan said earlier this year.

“We have already received more than $500 million in direct revenues to Etihad and Air Berlin today delivers more than $150 million a year in direct revenues, as well as wide-ranging cost synergies that have already reached more than $100m.

“In addition, the Air Berlin relationship is delivering a contribution of more than $630m a year to the Abu Dhabi economy. This is why we remain committed to the restructuring of that business as it moves forward," Hogan added.

Codeshare flights allow carriers to jointly market a route, allowing them to expand their network and help fill their planes. The agreement with Lufthansa will allow Etihad to grow further into South America.

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