Abu Dhabi-based Etihad has been pursuing a fascinating business strategy. In many ways the airline seems less interested in making money (though they finally eeked out a modest profit in 2013, based on reported numbers) than in building up the United Arab Emirates capital as a global aviation hub.
Etihad seems to have a bit of an inferiority complex regarding its Dubai neighbor Emirates, whose hub is a mere hour’s drive away. Dubai is a clear financial center with natural traffic to and from, whereas Abu Dhabi doesn’t draw the same travel.
When flying Etihad, they almost never just mention “Abu Dhabi” but always pair it with the phrase, “Our capital city, Abu DHabi” as if to remind you that they’re important, too!
They have aspirations to become a global crossroads, but it’s something they cannot support with travel to and from their capital. In order to support these ambitions they need to push huge amounts of traffic traveling to and from other parts of the world through the airport. The way they’ve done this is creative partnerships, and making big investments in other airlines in order to work closely with them to direct their connecting traffic through Abu Dhabi.
Now they’re stringing together some of the airlines in which they’ve made such an investment and talking about them as a new fourth alliance.
Etihad Airways has just announced the debut of Etihad Airways Partners, a new brand which will “bring together like-minded airlines to offer customers more choice through improved networks and schedules and enhanced frequent flyer benefits”.
The initial alliance will have Air Serbia, Air Seychelles, Jet Airways and Darwin Airlines join Etihad. Virgin Australia, 21% owned by Etihad, will not start out as a member. And neither will Alitalia, which is receiving an investment of over $2 billion from Etihad for a 49% stake but where the transaction has not yet closed.
Etihad says the alliance will be open to other airlines. Of course it will. Any carrier that wants to redirect it’s long haul traffic through Abu Dhabi, without even demanding an upfront investment of cash from the Gulf carrier, will be welcome to do so!
“However any airline can become an Etihad Airways Partner even if it is part of an existing alliance,” Etihad said, citing the example of airberlin which is part of oneworld.
EY ceo James Hogan said: “We are broadening our business model to articulate and define a partner proposition for like-minded airlines which will result in synergies and efficiencies for participating airlines on the one side, and enhanced network choice, service and frequent flyer benefits for the consumer on the other”.
…“The potential for network alignment to maximise flight connectivity for passengers, together with a shared passion for superior service, are central to the ethos of the Etihad Airways Partner concept,” he said.
airberlin, of course, isn’t exactly a surprising member of this alliance.. given Etihad’s stake.
Network alignment, of course, means directing your traffic through Abu Dhabi.
There’s no reason to expect though that talking about alliances will preclude non-alliance partnerships — Etihad partners, for instance, with American Airlines and is happy to have their domestic feed for their US flights. Though they’ll fly to US destinations without regard to profitability, even a money losing flight like Washington Dulles (connecting the capital of the US to the capital of the UAE) they try to right-size by downgrading capacity to a Boeing 787 in the coming months.
I actually expected a few years ago that American would partner with Emirates when the Dubai-based airline lost its US partners United and Continental. Skywards and AAdvantage did have at least one high level meeting, and Emirates was certainly interested, so I was surprised when the Etihad partnership was announced shortly afterward.
The concept of a fourth alliance is hardly new. We almost had a 4th alliance up until a decade ago. It was called “Wings” but Continental, Northwest, KLM, and Alitalia folded into Skyteam.
We may be seeing consolidation in the US airline market, but we’ve seen fragmentation in the global allinaces (even as Etihad consolidates the world’s airlines).