Sun

18

Dec

2016

Lufthansa & Etihad - Jumping Over Their Shadows

Who would have thought it possible even six months ago.
The battle of the giants has created new allies.
Last Friday’s announcement that Lufthansa and Etihad have agreed to work together took the market by surprise.
If you’d asked the trade some time back whether LH & EY would be a perfect fit, you’d have been declared as being crazy.

Is the new codeshare agreement the start of a happy marriage?
Or is it a marriage of convenience?
It is no secret that Lufthansa, along with other European legacy carriers has been facing tough competition from the so-called Gulf carriers over the past years.
This applies to both passenger and cargo sectors, whereby carriers such as Etihad, Emirates, Qatar Airways and now Oman Air have fast developed into serious players on the world’s cargo and passenger markets.

“If you can’t beat them - then join them”
This might be the motto for other legacy carriers as well.
We have seen this happening between the IAG Airline Group and Qatar Airways over the past 12 to 18 months.
Despite the progress made by the Gulf carriers, we intend to forget that they themselves have become serious competitors amongst each other as well and are on the lookout for viable partnerships with longer established airlines.

Etihad Airways has bought into quite a few European carriers, among them, Alitalia and Air Berlin. Both are problem children, costing a fortune to keep afloat and not yet bringing the hoped for results.
The new codeshare agreement sees Lufthansa placing their LH code on the four daily Etihad passenger flights between Abu Dhabi and Germany (FRA & MUC).
In return, Etihad will put their EY code on the Lufthansa long-haul passenger flights from Frankfurt to Rio de Janeiro and Bogota.

Nothing really spectacular at the moment, but surely it is not planned to end there!
Friday’s announcement also included the new agreement between LH and Air Berlin, in which Etihad has a 29% holding. This entails Lufthansa the daughter companies Eurowings and Austrian Airlines wet-leasing a total of 38 passenger aircraft from Air Berlin as of February 2017 for a period of six years. Eurowings will take 33 and Austrian 3 aircraft.

Thomas Winkelmann to take over Air Berlin’s chair  -  photo: hs
Thomas Winkelmann to take over Air Berlin’s chair - photo: hs

Lufthansa’s Winkelmann to take the reins at Air Berlin
There was another interesting development over the weekend which shows that Lufthansa is taking another step to get closer to Etihad. It was reported in LH circles that the present Air Berlin boss, Stefan Pichler will step down and be replaced as CEO by Thomas Winkelmann who since one year runs Lufthansa’s second German hub in Munich. Winkelmann was previously CEO of Germanwings, the LH low cost carrier.

Etihad grows its cargo fleet - LH Cargo fleet needs streamlining
The Abu Dhabi-based carrier has a total fleet of over 100 aircraft, mostly long haul types with ample belly space and a dedicated cargo fleet of ten aircraft.
The relatively new EY cargo fleet is almost the same size as that of Lufthansa Cargo which has still many old and expensive MD-11 freighters on its books.
It is no secret that Lufthansa has to phase out the MD-11Fs but has so far not committed to increasing their present fleet of five B777Fs in the future.

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Could the future LH Cargo development be that one of the next steps will be an Etihad - LH Cargo tie-up?
Etihad has shown double-digit figures with regards to cargo growth, whereas LH Cargo can this year show at best a zero growth.
Why not!
Etihad’s CEO, James Hogan, is being hard pressed to finally make a success out of the investments made in carriers he has partly acquired.
The wet-lease agreement takes a lot of pressure off Etihad with regards to Air Berlin, whom many see as the dying swan in the aviation market.
Lufthansa Cargo is convinced that their tie-up with All Nippon (ANA), United and Cathay Pacific, is the way to go in the future.
A Middle East carrier would round off the cargo picture and it certainly looks like Etihad could or will be the choice for the future.

The first step has been made with two arch-enemies “jumping over their shadows” and forcing the start of a new alliance.

John Mc Donagh

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