Restructuring in sight for Etihad and its European investments?

It was described as one of the most ambitious in the Gulf, and one of the fastest growing in the world. TheAbu Dhabi, Etihad In the space of a decade, Etihad has gone from a company generating some 300 million dollars in revenue to an airline group worth more than 26 billion. In ten years, Etihad has seen its traffic soar: 18.5 million passengers in 2016 compared with 4.6 million in 2007, 119 aircraft compared with 37 during the same period, and a network of 112 destinations last year compared with 44 in 2007.

the leading capital-intensive airline alliance

Etihad has thus become a a global player in air transport. Not only through its size and network, but also through its investments in a dozen or so other airlines around the world, building what some observers consider to be the first capital-intensive alliance in air transport by analogy with Oneworld, Skyteam and Star Alliance.

Finally, the confidence of the Abu Dhabi authorities in the CEO of Etihad seems to have been eroded, especially since the fall of oil price between the end of 2014 and the third quarter of 2016 put a strain on the Emirate's "infinite" resources. For the first time in its history, the airline cut back a little last year: 112 destinations compared with 116 in 2015, and 119 aircraft compared with 121 a year earlier. However, the load factor, at an average of 79%, has stagnated since 2014.

Etihad's investments in Airberlin and Alitalia have always resulted in continuing losses: a situation that has become akin to a danaid's barrel for the Abu Dhabi authorities. On average, they are forced to dip into their wallets every year to stem the losses.

Alitalia, 49% of which is owned by Etihad, is expected to post losses estimated at €400 million in 2016, compared with €200 million in 2015; Airberlin, 29% of which is owned by Etihad, has more than €1 billion in debt and has been racking up losses for five years. The German carrier has had no fewer than four CEOs since 2011...

In total, Etihad's European investments have resulted in losses of more than €2.5 billion over the last six years. Only Air Serbia has so far turned a profit in 2014 and 2015. But the company remains a modest player, having carried 2.7 million passengers last year.

According to the German business daily Handelsblatt, the chairman of Etihad's supervisory board, the chairman of Etihad's supervisory board, Ahmed Ali Al Sayedhis expected to announce the measures it intends to take to stem its losses, a programme that will probably be put in place after the departure of the CEO. James Hogan in late February or early March. Airberlin could be saved thanks to thesupport from Lufthansa (see below), while Alitalia could bear the brunt of this restructuring... The new directions are set against the backdrop of the reconciliation begun at the end of last year between Lufthansa and Etihad, who have announced an very limited code sharing and an agreement on "airberlin "rescue.

Lufthansa, a potential partner in Europe

James Hogan recently justified its strategy, stating that the Etihad Aviation Group had been a key factor in the carrier's growth: " Our 5.5 million connected passengers on Etihad, thanks to our partnerships and code-sharing, have generated revenue and facilitated the development of our business. synergies. On the revenue side, this has translated into hundreds of millions of dollars more. Acquiring a stake in certain companies has enabled their managers to transform their operating methods in order to make them profitable. But this requires a long-term vision. "he added in Dublin a few days ago. According to James Hogan, investment in Air Serbia, Air Seychelles, Etihad Regional, Jet Airways and Virgin Australia are already starting to contribute to the carrier's revenues.

Etihad's future could be a joint venture with Lufthansa. The German airline and Etihad are now code-sharing on half a dozen routes, while 33 airberlin aircraft have been leased into theEurowingssubsidiary low-cost of Lufthansa. Many analysts and newspapers have reported rumours of Etihad taking a 30% or 40% stake in Lufthansa. Rumours dismissed by the two protagonists, but an exchange of shares - on a much smaller percentage - would be a more realistic option. And one that would allow network synergies between the two carriers, as well as the consolidation of the business of a smaller Airberlin, which would concentrate most of its activity on its two main routes. hubs from Düsseldorf and Berlin Tegel.

Etihad Regional, a Swiss-based airline, could also serve as a regional feeder for Swissanother airline in the Lufthansa group. It would also give Lufthansa a foothold in the Middle East - a region where local airlines have been undercutting the German carrier in Europe-Asia/Oceania passenger flows. And for Etihad, it would be an opportunity to work with one of Europe's strongest airlines, enabling the development of interesting synergies. Following the example of Qatar Airways and British Airwaysnow capital partners.