Is a merger between Etihad & Emirates on the cards?

Speaking to The Middle East Online today an industry spokesman confirmed that rumours of a merger between the UAE’s world class aviation giants,  Etihad, based in Abu Dhabi and Emirates, based in Dubai, are rife. “Both airlines have worked hard to achieve their positions at the forefront of the global aviation industry and I think both  are to be applauded for their individual achievements. However,  the industry is a changing one; budget carriers have taken a large chunk of the business that would once have gone to the national carriers and continue to represent a threat to growth. I am certain the two airlines would prefer to maintain their separate identities but, given what they have achieved operating as separate entities, I think any merger between them would result in something quite special and unique in the world of aviation.”

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The ruling familes of the United Arab Emirates, which control the Emirates and Etihad airlines, have held talks about possibly merging the two airlines, according to Handelsblatt quoting several well placed sources.

The Gulf carriers are experiencing turbulent times after years of growth and expansion: both are struggling with falling profits and a changing industry. The possibility of consolidating the two state-owned carriers would not be easy, and require a huge amount of effort, but is clearly not out of the question anymore.

Etihad has in the past said it is not even considering scenarios that would include a closer association, let alone a merger, with Emirates. The airline said that there are currently no talks between the two companies, while Emirates did not respond to a request for comment by Handelsblatt.

But, say Handelsblatt, there is change in the air. The Gulf states have three big airlines: Emirates, Etihad and Qatar Airways. All three have experienced substantial growth since their inception, despite operating in a region with a small number of homegrown passengers. The UAE has a total population of about nine million: the same as London.

This small population had not impacted the airlines for several years. But times are changing. Emirates announced a 75 percent fall in half year profits in November. Etihad meanwhile announced at the end of last year that it would evaluate its global strategy as it continues to battle with persistent losses from its stakes in German airline Air Berlin and Italian flagcarrier Alitalia.Boeing+777-200LR

The Gulf-based airlines are reaching their limits and must change their operations to stay competitive. Lufthansa and Etihad last month agreed to a code-sharing partnership on flights from Frankfurt to Rio de Janeiro and Bogota.

Lufthansa boss Christian Spohr said last month in Abu Dhabi that he expected more rationalization among the Gulf Airlines, but did not specify what he meant.

Etihad and Emirates have a lot of overlap. Their respective hubs in Abu Dhabi and Dubai are only 140 kilometers apart, for example.

“Economically and strategically, a cooperation, or maybe even merger, between Etihad and Emirates would without a doubt make sense,” said Gerald Wissel of Hamburg-based aviation consulting agency Airborne Consulting. “But a lot of national sensitivities would have to be overcome. It’s not a simple topic.”

This article, published by Handelsblatt, was written by Jens Koenen

 

 

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