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Etihad Alitalia potential tie-up and the future of European Legacy carriers.
Tuesday, 8th April 2014
Source : Joseph Fischer - Exclusive & independent views
 

Exclusive Views: This week Etihad the Abu-Dhabi based premium carrier is due to place an official bid to buy the Italian flag carrier – Alitalia;

This could be an aviation game-changer and a move that will set in motion a wave of other mergers and strategic partnerships.

Clearly, Alitalia needs this tie-up. Without it, Alitalia is back at square one, desperate for capital injection.

A deal between Alitalia and Etihad isn't only a life-line for Alitalia. It is also a great deal for Etihad, who in the past few years became partner in Germany's second largest airline – Air Berlin and NikiAir.

In addition, they recently bought 49% of JAT the ailing Serbian carrier and changed its name to Air Serbia as well as 33.3% of the Swiss regional airliner – Darwin airline and changed its name to ETIHAD REGIONAL.

These tie-ups and partnerships do not stop in Europe.  Last year Etihad took a stake of 24% in the Indian carrier Jet Airways

Many of us are asking: what is Etihad's 'Game plan’?  What is the strategy behind those moves?

In my opinion, the answer is quite simple:

Etihad has a clear and extremely ambitious vision to dominate the world's LONG-HAUL routes. In order to achieve this goal, Etihad is buying into the airlines situated in major tourist feeder markets - the EU and ASIA.

I also expect to see future acquisitions in the North American and African markets as well.

Why does a rich, but rather small country like Abu Dhabi want to dominate the world skies? Again the answer is simple: because it can.

The geographic location of Abu Dhabi is a strategic one- half way between Asia and Europe. This location is ideal for long-haul flight connections.

Abu Dhabi isn't only heavily investing in the carrier. It is also pouring significant amounts in the development of the airport hub.

Yes, Ego also plays a role in this huge move. Abu Dhabi's good partner in the GCC – Dubai, has turned into a tourism paradise with over 10.5 million tourists in 2013. 

DXB airport is already one of the world's five largest airports. Its volume in the next five years will make it the world's largest airport hub.

Dubai recent appointment as the host off the EXPO 2020 is the icing on the top.  Abu Dhabi is keenly following Dubai’s success story and is looking to take “a slice of the cake”.  

We can see that the hotel development in Abu Dhabi is gaining speed. Although still very far from the 63,000 hotel rooms of  Dubai with an additional 12,000 in the pipeline currently under construction.

Abu Dhabi is focusing less on the actual tourist visits and more on the transit passengers.

So, what is next?

I guess that soon we can expect Emirates to make a counter move. Emirates can't just give up market share.

The most logical move for Emirates in Europe is the Lufthansa Group. Air France - KLM would also be a logical move.
This type of move could be much more complicated and regulated. Both airline groups are bigger then Alitalia. Both are in better financial condition and in both airlines the Employee Unions have a much stronger position.

Another logical option for Emirates to consider would be a tie-up with Turkish Airlines. This move would probably be easier in terms of the workers’ unions, however, the huge Ego of the Turkish PM might be an obstacle.

We are living in interesting times...

Joseph 'Yossi' Fischer
Owner at Vision Hospitality & Travel

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