Etihad Airways’s Australian CEO James Hogan doesn’t have to think too hard about what to say. This week, he said: “Etihad will discuss ways to further integrate the two networks and help the airline achieve efficiency, build revenue and reduce costs.”
He wasn’t talking about Jet Airways, his most high-profile investment which is likely to be given permission for take-off any time now. He was speaking in Belgrade, where he signed an agreement with the Serbian deputy prime minister to pick up a majority stake in Air Serbia, the latest carrier to come into Etihad’s embrace. When the formalities are complete over the next few months, Etihad will own 49 percent in the loss-making Serbian national carrier.
At different times in the past two years, Hogan has made very similar statements about Air Berlin, Aer Lingus, Air Seychelles, Virgin Australia and Jet Airways. Just a decade old, the mid-sized Etihad (70 planes, mostly wide-bodies) has been executing its own version of the ‘string-of-pearls’ strategy around the world, and Jet is only one of them. At the core is not just an equity holding, but a well-crafted airline-cum-airport strategy where Abu Dhabi becomes a crucial hub in this part of the world. Etihad’s expansive web of bilateral agreements with many airlines is built on the reality that airline hubs bring economic prosperity. In many ways, Hogan is thus not only shaping the future of Etihad, but even the future of the Emirate of Abu Dhabi.
In financial terms, Etihad’s investments have just begun to pay off. In 2012, revenue from codeshares with partner airlines was about 19 percent of total revenues. Codeshare and equity partnerships delivered close to $629 million. In terms of scale, though, Etihad is still far behind its older and possibly more glamorous rivals Emirates and Qatar Airways. Yet it is gradually making a mark through its unique model. It already boasts of the largest network for any Middle East carrier, even if less than a third of it is operated with its own metal birds.
Looking ahead on the changes in Jet’s network, Amber Dubey, partner and head of aviation at KPMG, says Etihad will now have access to 26 Indian cities. A lot of the key decisions will obviously be taken jointly. The new deal will change the nature of international routes for Jet. Most European services are likely to be dropped and the focus will be on connecting to Etihad’s hub in Abu Dhabi. Jet will become more regional, with a heavy focus on providing passenger feeds to Etihad. Ernie Arvai of aviation consulting firm AirInsight says the two airlines will try to provide a more seamless experience for passengers. Aircraft acquisition, seat configurations, and cabin service will be much more integrated.
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(This story appears in the 23 August, 2013 issue of Forbes India. To visit our Archives, click here.)
it is good for india. between praful patel, goyal, pawar and the govt of india they would have milked civil aviation in india to its last drop. we would all have shoddy services at premium prices.thank you etihad.on Dec 4, 2013
Seems to be interesting wrtie-up on partnership deal. butl a lot of criticism was there on Indian news channel -Times Now etc. the way the deal has progressed? Still hope that it works in the interest of consumers at large. Corruption seems to inevitable issue now at all levels.on Sep 8, 2013
The failures at JET are more to do with NG\'s centralised system of management. The JET board flying to London for their meetings at NG\'s office is legendary. What can you expect from a bunch of yes men, obviously its not the most inspiring enviourments, especially in a agreesive industry like aviation. The USP of India lays in its market. The LCCs have shown that a truly innovative and aggressive management can succeed. Aviation is a capital intensive biz. Abudhabi has plenty of dosh to fund it, on the back of $100/brl oil. At the same time, for every $/brl of Oil below $100, makes the competition stronger. Especially if they are based in a very large catchment. The JETHIAD deal as known in India, reflects very poorly on the status of India as a leading nation, leave aside the means by which it was achieved. Once we see the Final word on this deal. Only then can we comment on its effectiveness.on Aug 10, 2013
LCCs have certainly been the cause of Jet\'s downfall. The final word on Jetihad expected in a fortnight, say the management.on Aug 10, 2013
Air Serbia (JAT) actually focuses on central Europe, out of the erstwhile Yugoslavia. When Etihad started flying, Jet had supplied services including technical assistance. Well written analysis! We are working on http://www.slideshare.net/amalistclienton Aug 10, 2013