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Abu Dhabi, UAEMonday 22 October 2018

Etihad and Lufthansa strike code-share deal

Under the agreement, which is subject to government approval, the UAE’s flag carrier will put its EY code on Lufthansa’s long-haul, non-stop intercontinental services between its base in Frankfurt and Rio de Janeiro, Brazil, and Bogota, Colombia.

Etihad Airways has signed a ground-breaking agreement with German giant Lufthansa to code-share on some flights, in a deal that is a prelude to a much closer relationship between the two national carriers.

James Hogan, president and chief executive of Etihad, said: “It is very clear to us at Etihad Airways that Lufthansa is a like-minded, forward thinking organisation with which we can do strong, meaningful and mutually beneficial business.”

The first stage of the deal allows passengers to share codes on some flights between the UAE, Germany and South America, but its significance is far greater than this initial co-operation.

Lufthansa had been among the big European airlines that complained about Gulf airlines’ alleged anti-competitive practices in the long-running row over “open skies” policy.

The German carrier also supported a long-running legal action in Germany over code-shares by Etihad’s partner airberlin, which has since been resolved.

Mr Hogan said: “We have long seen Germany as a key strategic market for Etihad and this new relationship with Lufthansa marks the next step in our commitment to the leading European aviation group. Lufthansa is highly respected globally and I’m very pleased that we will work together in the future for the benefit of our customers.”

Etihad also confirmed a “wet lease” deal between Lufthansa and airberlin, under which two Lufthansa airlines, Eurowings and Austrian Airlines, take over full operation and maintenance of 38 aircraft formerly flown by airberlin.

That deal has already been announced as part of a wide-ranging restructuring of the loss-making airberlin.

Carsten Spohr, chairman chief executive of Lufthansa, said: “We are looking forward to partnering with the Etihad. The wet-lease contract with airberlin fosters the growth of our Eurowings Group. The codeshare agreement of Lufthansa and Etihad will offer our customers more benefits and complement both airlines’ networks. We will consider extending our cooperation in other areas.”

Despite the row over “open skies”, Mr Hogan and Mr Spohr are said to enjoy a good relationship and mutual respect over a number of years.

Under the codeshare agreement, the German airline will place its ‘LH’ code on Etihad Airways’ twice daily non-stop flights between its home base of Abu Dhabi and Frankfurt and its twice daily non-stop services between Abu Dhabi and Munich, the biggest city in southern Germany.

The UAE’s national airline will, in turn, put its ‘EY’ code on Lufthansa’s long-haul, non-stop intercontinental services between its home base of Frankfurt, the business and commercial capital of Germany, and Rio de Janeiro, Brazil, as well as Bogota, Colombia.

The future co-operation is likely to involve code-sharing on other flights, but may also extend to other operational areas. Further details will be announced soon.

Etihad currently has code share deals with 51 airlines around the world, but the deal with Lufthansa is potentially the biggest and most significant. Code sharing allows airlines to effectively share flights by offering passengers of one carrier the ability to book a flight directly on another airline.

An aviation industry expert said: “Who’d have thought a Gulf airline would have done a deal with the German power house after all that’s happened? This dramatically strengthens Etihad’s position in Europe.”

Ethad has been directly involved in German aviation since late 2011, when it took a 29.2 per cent stake in airberlin, then the country’s second largest airline after Lufthansa. Airberlin joined the global Etihad Aviation Group partnership of international airlines, but struggled financially in a competitive European market.

Etihad has funded the lion’s share of airberlin losses, but points to hundreds of millions of dollars worth of revenues and cost savings as a result of the German tie-up. It was recently estimated that the airberlin business generated $630bn per year for the economy of Abu Dhabi.

A restructuring of airberlin earlier this year led to its exit from the tourism flights business, and a refocusing on short and medium haul European markets. Subsequently, Etihad announced a plan to become a player in the European tourism business via a link-up with German travel company TUI.

Earlier this year Qatar Airways announced an equity and operational tie-up with British Airways.

Saj Ahmad, chief analyst at aviation consultancy Strategic Aero Research, said of the Etihad/Lufthansa tie up: “This is a very significant and positive deal. It signals a realisation by European carriers that instead of shouting off about Gulf airlines, why not do a deal with them? Lufthansa is the latest one to have seen the benefits of being in an alliance with a strong, fast-rowing, well-financed Gulf carrier. It also leaves Air France/KLM out in the cold.”

The six-year agreement takes effect from February 2017 subject to any regulatory requirements.

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