Etihad Forgoes Major Alliances To Expand Market

Wednesday, 24th April 2013 at 10:53am

If there's one lesson Etihad has learned from not joining in any major airline alliances, it's strategic partnership with any major carrier with extensive network.

Major airline alliances in the world, such as oneworld, Skyteam and Star, have one goal in common - to expand market share beyond their own network. Etihad has learned that any airlines could expand their market without really having to go into mergers or costly investments that require large capital outlay.

Its latest move to acquire at least 24% stake in India's Jet Airways will prove just that. But before that, the Abu Dhabi-based carrier has already made similar acquisitions through stake purchases in four other airlines.

The Gulf carrier began its stakes acquisitions across the world in December 2011 when it acquired a minority but substantial stakes, 29.21%, in Air Berlin. Two months later, it successfully acquired 40% stakes in Air Seychelles, making it a major foreign stakeholder of the state-owned flag carrier. Its minority acquisitions in Virgin Australia with 10% and Aer Lingus with 3% followed in succession last year.

James Hogan, Etihad president and CEO, said that its equity alliances with other airlines, albeit minor shareholdings, would enable the Gulf carrier to enter markets without having to go through complex processes.

The planned stakes purchase of Jet Airways by Etihad though not finalized yet as of the moment but is expected to be sealed within the year.

Once completed, Etihad Airways would be able to penetrate the huge Indian market outside its current network. The Gulf carrier currently flies to 10 major Indian destinations making it one of the three largest foreign airlines (all Gulf-based) to serve all the major cities in India. The competition is seen to pose a major challenge to other foreign carriers who fly to India.

The deal between Etihad and Jet Airways is said to give Air India an edge over other Indian carriers to join any of the major global alliances that have been courting for years but in vain due to impediments posed by the government. The Indian government has maintained that no Indian carriers could join a major airline alliance unless Air India is admitted first.

Etihad has managed to expand market, revenue and profit through its own network expansion effort, strategically forged partnerships through codeshare agreements with a number of foreign carriers as well as stakes acquisitions, albeit minor, across the world.

By: Pete Lee.