THE THORN IN U.S. CARRIERS' SIDES
Hogan's DIY equity alliance extends Etihad's reach far beyond organic growth and allows for single-point-of-contact contracts that force legacy carriers to compete harder for corporate business.
The Gulf carriers were sending 25 aircraft daily to the United States in May 2015, compared with only one departure among them a decade earlier. The colossal capacity increase there and worldwide, combined with plummeting oil prices, means plenty of pricing pressure. U.S. airlines responded by lobbying Congress, unsuccessfully so far, to limit the Gulf carriers’ landing rights, claiming they benefit from $100 billion of state subsidies and from nonunionized workforces with few rights.
The smallest and youngest of the trio is Etihad. Launched in 2006, it flies 111 aircraft to 111 destinations, and it compensates for its size with a global alliance of carriers. The Etihad Airways Partners network includes Air Berlin (in which Etihad owns a 29 percent stake), Air Serbia (49 percent), Air Seychelles (40 percent), Alitalia (49 percent), Etihad Regional (formerly Darwin Airline, 33 percent) and Jet Airways (24 percent).
EAP serves 580 destinations and is sold as a cohesive proposition to corporate clients. “It opens up new markets beyond our organic growth and codeshares alone and allows us to compete meaningfully for corporate business,” Etihad president and CEO James Hogan told BTN. “A key benefit is to have one contract across EAP partners and one point of contact. It saves time and money on both sides of the equation and provides a seamless service experience.”
Hogan described 2015 as a “phenomenal year” with 150 percent network growth. U.S. carriers may be relieved to learn he has ruled out significant additional transatlantic capacity for Etihad, but he has warned of more United States-bound routes next year for Air Serbia and Air Berlin. Transatlantic expansion also could follow for Alitalia when it exits its joint venture with Air France-KLM in 2017.
Correction Oct. 6, 2016: A previous version of this story stated that Alitalia would exit its joint venture with Delta Air Lines in 2017. That was incorrect. Alitalia will exit its joint venture with Air France-KLM next year. The JV with Delta will remain intact. BTN regrets the error.