October 02, 2012
Etihad Airways would like to see its European affiliate Air Berlin eventually included in the wide-ranging code-share agreement that Etihad is negotiating with Air France-KLM.
“If there is an opportunity, we would be keen to see [the inclusion of Air Berlin] happen,” Etihad CEO James Hogan told Aviation Week at the airline’s headquarters in Abu Dhabi. The code-share negotiations with Air France-KLM have been “very good and are continuing,” Hogan says.
Linking Air Berlin with Air France would not necessarily put the German carrier’s membership in the Oneworld alliance into question. However, it would shift the carrier’s network priorities to align even more with the broader Etihad strategy, and raise the question of how much additional value the alliance membership brings. “Oneworld is secondary,” Hogan says.
Etihad bought a 29% stake in Air Berlin late last year for $105 million, while also providing a $255 million loan to its new partner. The German carrier’s financial results have been deteriorating rapidly, but Hogan says he is convinced that the company will turn the corner. He predicts that Air Berlin will return to profitability “within the next 12-18 months.” He also stresses that “they won’t need another loan.”
The appointment of former BMI CEO Wolfgang Prock-Schauer as head of network and strategy at Air Berlin was an important move, notes Hogan. The network “needs to be refreshed” and Air Berlin executives “know they have to make tough decisions,” he says.
In spite of the company’s ongoing losses on short-haul flying, Hogan still sees the European network as core business. While Air Berlin’s long-haul product is being upgraded to match Etihad’s standards, Hogan says that is not the target for the European and domestic services.
Etihad announced a code-share deal with Saudi Arabia’s Nas Air on Oct. 1. The deal will give Nas Air better access to Saudi secondary cities and better connectivity from Asia to Saudi Arabia through the Abu Dhabi hub. Etihad decided not to buy a stake in Nas Air. “Our equity strategy is limited,” Hogan says. In addition to Air Berlin, Etihad holds stakes in Air Seychelles, Aer Lingus and Virgin Australia–mainly to provide feed at the ends of Etihad’s network.
Hogan says the carrier has no intention to fly North Atlantic routes from Europe, even though the bilateral air service agreement between Germany and the United Arab Emirates gives UAE carriers limited fifth-freedom rights to the U.S.