Etihad Airways' move is "a game-changer", expanding its reach in Europe and providing a financial boost to the continent's sixth largest airline.
Etihad becomes Air Berlin's largest shareholder
Etihad Airways has agreed to pay US$95 million (Dh348.9m) to increase its stake in Air Berlin to nearly 30 per cent, becoming the largest shareholder in Europe's sixth-largest airline and expanding its reach in the continent.
The deal provides a financial boost to the German airline, which has been struggling to return to profit. Shares in the airline rose as much as 12 per cent to €2.59 after the deal was announced yesterday.
Etihad will buy 31.6 million new shares in the airline, taking its stake to 29.2 per cent. Earlier this year, the Abu Dhabi carrier paid $10m to take a 2.9 per cent stake in Air Berlin.
"This is a game-changing move," said James Hogan, the chief executive of Etihad Airways.
"This new partnership expands our network reach, gives us access to 33 million new passengers, and provides us with a real opportunity for global growth. Through Air Berlin, we gain immediate access to a broad and complementary European market, with outstanding connectivity options for customers of both airlines."
The deal connects both airlines' networks and frequent flyer programmes to offer 239 destinations across 77 countries. Incremental revenues of between €35m and €40m are expected to be created for both airlines in the first year.
Etihad's stake follows similar steps taken by the airline this year to increase its global coverage. It formed a strategic alliance with Virgin Blue of Australia and signed codeshare agreements with Air New Zealand and last week with Hainan Airlines, the Chinese carrier.
The latest deal means Etihad now offers a route network more than 80 destinations larger than that offered by any other Gulf carrier.
It also gives Etihad access to Berlin ahead of Emirates Airline, which has long been lobbying for landing slots in the German capital. Until now, Frankfurt, Munich and Dusseldorf were Etihad's German destinations.
Under the codeshare with Air Berlin, Etihad will sign similar agreements with the German company's subsidiaries including Niki of Austria and Belair from Switzerland.
"This move is certainly a coup in more ways than one and will likely put the focus on other GCC rivals such as Qatar Airways, Gulf Air and Emirates to eye opportunities similar to this in order to grow their market share in Europe, particularly as the region is keen to visit and pass through the GCC," said Saj Ahmad, the chief analyst at StrategicAero Research.
Under the deal, Air Berlin will shift its Middle East operation from Dubai to Abu Dhabi. From January 15 it will operate four A330-200 flights a week between the German capital and Abu Dhabi. European passengers will have immediate access to a total of 29 flights a week to and through Abu Dhabi from four German cities. The plan is to increase the number of flights to 42 from mid-April.
The German airline has had a turbulent year. Joachim Hunold, the founder and chief executive, resigned in August having struggled to turn the airline around despite pushing back aircraft orders and cutting unprofitable routes. The airline's debts expanded to €644m at the end of September from 489 at the end of last year.
As part of Etihad's deal, the UAE national airline will provide five-year financing facilities of up to $255m to support fleet development and future network growth.