Dubai: Etihad Airways, the UAE's national carrier, on Monday threw a lifeline to the debt-ridden airberlin by subscribing to 31.57 million new shares for €72.9 million (Dh349.02 million), raising its stake in the second biggest German airline to 29.21 per cent.
The deal which brings to 269 the total number of destinations it serves, either directly or with partner airlines, means Etihad Airways now offers a route network more than 80 destinations larger than that offered by any other Gulf carrier.
The latest investment increases the Abu Dhabi-based airline's stake in airberlin from 2.99 per cent to become the single largest shareholder in Europe's sixth biggest airline.
Investors greeted the news as airberlin shares jumped 12 per cent and were up 8.7 per cent at €2.51 by 1133 GMT yesterday.
Etihad Airways, established by the Abu Dhabi Government in 2003, and airberlin carry a combined total of more than 40 million passengers a year, operate 233 aircraft, and employ 18,000 people. Together, the companies generate more than $9 billion (Dh33.05 billion) in revenues.
With the deal, each airline could achieve incremental revenues of between ¤35 million and ¤40 million in just the first year.
Fleet development
Etihad Airways will provide five-year financing of up to $255 million to support fleet development and future network growth.
The strategic move, announced yesterday in Berlin by Etihad Airways Chief Executive Officer James Hogan and airberlin CEO Hartmut Mehdorn, connects the airlines' extensive networks and frequent flyer programmes to offer travellers 239 destinations in 77 countries.
Hogan said his airline is looking for more such opportunities that will help it to grow its network further.
"This game-changing move will help us to strengthen our global presence," Hogan told Gulf News in a phone interview from Berlin. "We will continue to strengthen our relationship in different parts of the world as we have done in Australia."
Airberlin will shift its Middle East operation from Dubai to Abu Dhabi. The airlines said they are committed to creating a joint procurement taskforce to look for cost efficiencies across the two companies, including areas such as fleet procurement and deployment, maintenance, repair and overhaul (MRO) and general procurement.
"This new partnership expands our network reach, gives us access to 33 million new passengers and provides us with a real opportunity for global growth," Hogan said. "Through airberlin we gain immediate access to a broad and complementary European market, with outstanding connectivity options for customers of both airlines."
Implications
Under the agreement, Etihad will have two seats on the board of directors of airberlin. James Hogan will be appointed vice-chairman of airberlin's board of directors.
"Etihad's increased stake in airberlin alongside a wide-ranging code-share deal will give the UAE flag carrier a much needed boost to its presence in Europe as well as potentially giving it a foothold into possibly joining the oneworld alliance should it want to do so further down the line," UK-based aviation analyst Saj Ahmad said.
"The immediate benefits of this deal are clear. Airberlin's operational move to Abu Dhabi will yield a bigger number of Europen tourists to the UAE and will also allow the German airline to filter its passengers to destinations served by Etihad's growing global footprint, especially to key markets like Asia and Australasia. What is equally important in this deepening tie-up is the financial security that Etihad brings to the table."
Hartmut Mehdorn said, "One of the key components of the new partnership is the launch of airberlin services to Abu Dhabi, which will become our new gateway to Asia and Australia. The agreement with Etihad Airways will also dramatically improve the global connectivity of our customers in Germany, Switzerland, Austria, and throughout the GCC and Middle East."
Frequent flyer programmes of both airlines — Etihad Guest and topbonus, will be integrated, enabling passengers of each airline to ‘earn and burn' on each other's flights.
Ahmad says, "Both airlines will eventually have an overlap of airplanes in their fleets such as the Airbus A330 and Boeing 787s and delivering cost savings through joint work in maintenance and other associated elements will drive synergies up and costs down.
"That said, the capital injection will provide airberlin a great opportunity to expand its fleet as it hones in on better connections through its services aligned with Etihad."
