Virgin’s V Australia subsidiary had agreed to enter into a code-sharing agreement with Etihad which would involve frequent-flyer programmes as well as coordinated pricing and scheduling. Image Credit: Gulf News archive

Dubai: Etihad Airways said yesterday it will pay $20 million (Dh73.4 million) for a 40 per cent stake in Air Seychelles as part of a strategic partnership between the two carriers.

The move further strengthens Etihad's aggressive acquisition strategy to grow its global network.

"Etihad Airways' investment of $20 million will be matched by an equal capital injection from the Government of Seychelles," the Abu Dhabi-based carrier said in a statement.

It added that it will also provide a "shareholder's loan of $25 million to meet working capital requirements" and support network development.

Under a Memorandum of Understanding, Etihad Airways said it will seek to increase the frequency of flights between Abu Dhabi and Mahé from four per week to daily, and to provide new services to the islands.

"Etihad's management contract with Air Seychelles will take effect on February 1, 2012," an Etihad spokesperson said in an emailed statement.

Natural next step

"The investment in the national carrier of Seychelles is a natural next step towards growing our operations in the increasingly important leisure markets of the Indian Ocean and Africa. This deal is consistent with our approach to expansion, which relies on the strength of strategic partnerships across the globe," James Hogan, president and chief executive officer of Etihad Airways, said.

He added that the integration of networks will in turn give Air Seychelles greater opportunity to tap into key tourism feeder markets across Europe, such as Germany, France, Italy and the UK, where Etihad Airways has a strong presence.

Saj Ahmad, chief analyst for StrategicAero Research, told Gulf News: "Air Seychelles has in the past complained about Arab carriers siphoning off their traffic, so it comes as a surprise they are tying up with what they perceive as ‘the enemy'. Overall, it makes great sense for Etihad to grow this way as it takes out a direct rival."

As for Etihad, Ahmad said the deal is a "win-win". "It's bound to have rattled the nerves of its competitors in Dubai and Doha," he said.

The agreement with Air Seychelles is Etihad Airways' second equity investment in a short span following its move last month to increase its stake in Air Berlin to 29.21 per cent, making it the single biggest shareholder in the German carrier.

The deal increased Etihad's total number of destinations to 269.

Etihad also said it will work with Air Seychelles to develop a renewed fleet and network growth plan for the carrier, and that the new partnership will further drive consolidation of key functions, resulting in significant cost savings.

The agreement provides for a five-year management contract for Etihad Airways which will see the implementation of strategic measures to encourage Air Seychelles' long-term commercial growth, the carrier said.


"The aviation industry is under enormous pressure right now, with small airlines especially vulnerable to global economic instability and ongoing oil price volatility. In this context, consolidation offers the best possible solution for Air Seychelles," Joel Morgan, Seychelles Minister of Home Affairs, Environment, Transport and Energy, said in a statement.

Ahmad said: "For the rest of 2012, Etihad is likely to seal more stakes in other carriers. Latin America and Asia seem potential targets for the airline."