Abu Dhabi’s Etihad Considers Joint Venture

Etihad Airways, the airline of Abu Dhabi in the UAE, plans to do a joint venture with Air France-KLM, according to the French daily “Le Figaro.”  On June 12, Joost Ruentol, spokesman for the KLM Dutch arm of Air France-KLM, revealed that the two sides had discussed the possibility of creating a joint venture, without providing further details.

The joint venture could emerge in the fall, and is expected to include Air Berlin, with is a subsidiary of Etihad and the second-largest German Airline, as well as Alitalia, which is 25 percent owned by Air France.  One objective of the maneuver is to counter the rise of Emirates Airline, which is the flagship airline of Dubai.

The report indicated that another aim of the joint venture would be for Etihad and Air France-KLM to build an “air corridor” between Europe and the Middle East.  Specifically which routes the joint venture will serve will be explored in the future, along with the number of aircraft the fleet will have, the prices to be charged, the marketing policy, and the conditions for the sharing of profits between the airlines.

“Reportedly, the agreement will go much further than just a business partnership,” states the French daily.  So far, there is only a commercial alliance (such as code sharing) between Etihad and Air France-KLM.  The primary obstacle to concluding the agreement will be the imbalances between actors, as 244 destinations are served by Air France-KLM against Etihad’s 66.

For the Franco-Dutch company, such a joint venture would reduce flight frequencies to Middle East destinations, of which there are currently 13, in favor of Etihad, which already serves 15 destinations in Europe including four in Germany.  They would then be able to reallocate fleet to higher priority areas, such as Latin America and Asia, sub-contract part of the European flights (10 in Germany and Eastern Europe) to Air Berlin.  In addition, the Tribune reported in March that Etihad could also possibly entrust the maintenance of its aircraft of Air France Industries.

Air France-KLM already has, since 2007, a joint venture with US company Delta Airlines and Alitalia, which allowed it to get hold of the majority of transatlantic flights between Europe and North America.

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