Rumours abound - but they are still officially only rumours as far as a possible joining of forces between Abu Dhabi-based Etihad Airways (EY) and Dubai-headquartered Emirates (EK). Some in the industry think that a fusion of the two carriers would make sense in the long run, others don’t see it happening - not yet anyway!
A Middle East success story
Both carriers have joined the ranks of the market leaders in aviation after having been just a few decades in the air. A remarkable success story of two airlines whose main bases are just over 100 km from each other.
Passenger and cargo numbers have grown steadily over the past 30 years ensuring that both airlines have considerably increased their passenger and cargo fleets and have become serious competitors to the other big players. Both Abu Dhabi and Dubai airports are not what one would see as being typical point-to-point destinations. A large percentage of the passengers and cargo carried on EY and EK flights is transit traffic to other destinations served from AUH and DXB.
Emirates, including Emirates SkyCargo started services back in 1985, whereas Etihad Airways came on line at the end of 2003 and Etihad Cargo, or Etihad Crystal Cargo as it was called then, started up with cargo being carried in the passenger fleet belly holds and then came the introduction of the Airbus A330F and B777F fleets.
Things had been going well for both carriers, but some industry experts tell us that there is far too much capacity for passenger and cargo fleets in AUH and DXB. A saturation some say, which can only lead to lower yields as competitors such as Qatar Airways and Turkish Airlines who operate in the same region with the same strategies as EK and EY, become more of a danger.
Would a fusion make sense?
It might not yet have to come to the point where both carriers become one.
Both operate simultaneously on more or less the same routes, have a fleet composition which is almost identical, use their hubs as transit points and operate freighter fleets which are compatible.
Etihad Airways has not been so lucky during the past decade with its investment plans boxed through by past management. Large sums were allocated to take shares in carriers such as Alitalia, Air Berlin and others. Much of this money went out the window as those carriers did not deliver or went bankrupt. Emirates has been more prudent in this respect but operates a fleet which is almost double in size of Etihad’s.
Emirates chairman and CEO, Sheikh Ahmed bin Saeed Al Maktoum was recently quoted as saying that a fusion has never been discussed in any way, shape or form.
Not discussed - but maybe being quietly considered?
Fact is that Etihad is trying to restructure itself after enduring very heavy losses from failed investments and Emirates’ Al Maktoum has not dismissed future joint-working plans altogether. In an interview with UAE newspaper Arabian Business in early May, he stated that “a merger is easier said than done and right now we are of the opinion that competition is good. However, there are ways we can work together more closely by using each other’s facilities and services.”
The “However” is important
If we stick with both carrier’s cargo products for example - then the however issue looks to be more realistic.
Etihad has not been as successful as Emirates with their cargo product. Whereas it is said that Emirates SkyCargo still enjoys acceptable yields and load factors, Etihad Cargo has lost ground. This has resulted in Etihad grounding 50% of their cargo fleet by (temporarily) grounding their five Airbus A330 freighters and using only the remaining five B777Fs.
According to the figures in Emirates last annual report, Emirate SkyCargo contributes 14% of the total Emirates turnover. This is an acceptable margin for the Dubai management. Emirates SkyCargo has phased out their older freighters and concentrates cargo services on their fleet of 13 B777Fs. Together, EK and EY have almost twenty freighters of the same type in service and a joining of forces here would make sense if they could agree on a mutual revenue / profit sharing. Other advantages would be to introduce joint handling, not only in the Emirates but also across the globe and joint crewing on the freighters. This would go a long way to a further cost cutting and better yields in the future.
And - after that? joint operations to keep a competitive edge?
As said earlier - rumours - or are they?
John Mc Donagh