Etihad Goes on a Buying Spree


In case you didn’t catch it, The New York Times profiled James Hogan, the chief executive of Etihad Airways, over the weekend. The newspaper claims “he’s never been so popular.”

Once, “the big European airlines like Lufthansa, British Airways and Air France-KLM lobbied their governments to restrict the fast-growing Gulf carriers’ access to European airports for fear of losing market share on lucrative long-distance routes, particularly to Asia and the Middle East.” Now they can’t get enough of Hogan and Etihad, which is wholly owned by oil-rich Abu Dhabi.

Before, “they argued that Etihad and its peers, backed by deep-pocketed governments and not burdened with outdated terminals, airport taxes and rigid wage schemes, enjoyed an unfair advantage that European airlines could never match.”

But now that Europe’s legacy carriers are broke, they want the kind of life-support Etihad offers. The airline has spent more than “$1 billion buying equity stakes and lending cash to half a dozen struggling airlines on three continents.”

Mr. Hogan calls his deal making “equity alliance.” For Etihad it has “yielded shared-ticketing agreements with more than 40 carriers.”

“There have been various cross-border acquisitions in the airline industry over time, but nothing like this,” Craig Jenks, an independent airline consultant, told the NYT. “It is quite distinctive and a radically new way for an airline to position itself in the global marketplace.”

Starting in 2011, Etihad bought 29 percent of Air Berlin, which was more than $600 million in debt. Next they purchased 40 percent of Air Seychelles.

Then came a 3 percent stake in Aer Lingus and nearly 18 percent of Virgin Australia. Earlier this year, “Etihad announced a $600 million deal with Jet Airways of India for a 24 percent stake and access to Jet’s coveted takeoff and landing slots at Heathrow Airport in London.” (The Jet Airways deal won approval from India’s cabinet last week.)

Last August, they bought a 49 percent stake in Serbia’s national carrier, Jat. Together with $100 million from the government in Belgrade, they plan to re-brand it as Air Serbia next month.

“We don’t have a shopping list,” Mr. Hogan told the NYT. “We invest where we feel we can achieve a strong commercial agreement and work together on cost synergies.”

The Tarmac has already hinted at the idea Etihad might buy into Alitalia. There’s also speculation about Poland’s state-owned carrier, LOT, as well as increasing it’s stake in Aer Lingus “with Ryanair facing a regulatory mandate to reduce its large minority stake” in the Irish flag carrier.

Mr. Hogan, 56, began his career with Etihad in 2006. Previously he worked for Ansett Australia, British Midland International, Hertz, the Forte hotel chain and Gulf Air.

Etihad’s “annual traffic has grown by 42 percent over the last two years, to nearly 12 million passengers.” They report equity partners generate a fifth of their revenue – $4.8 billion last year.

Last year, profits for the airline grew to $42 million, up from $14 million in 2011. Etihad flies to 94 destinations in 45 countries.

The Tarmac’s View: New long-haul aircraft continue to change the game. As the NYT notes, you can fly nonstop to almost any point on the globe from the Persian Gulf.

Photo credit: RHL Images / Foter / CC BY-SA


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Comments (Showing 1 of 1)

  • SQUALO at 3:05pm October 08, 2013

    Lufthansa, British Airways and Air France-KLM should have lobbied their governments to not to restrict the fast-growing Gulf carriers’ access to European airports, but to seek for tax cuts and other charges from their own governments.

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