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Abu Dhabi, UAETuesday 19 June 2018

Etihad to axe Dallas flights from next March

Move follows American Airlines’ decision to sever codeshare agreement with Etihad in July

Etihad said flights from the UAE's capital to Dallas route would will become “commercially unsustainable” once the codeshare is severed in 2018.  Etihad
Etihad said flights from the UAE's capital to Dallas route would will become “commercially unsustainable” once the codeshare is severed in 2018. Etihad

Etihad Airways will cancel all flights to Dallas-Fort Worth in Texas next year after US carrier American Airlines said it would terminate its codeshare with the Abu Dhabi-based airline in March, a move that analysts believe is unlikely to dent Etihad's profitability as it focuses on other core markets .

Flights to Dallas from the UAE capital will become “commercially unsustainable” once the codeshare arrangement is severed in 2018, Etihad said on Thursday, adding that operations on the route will end as of March 25.

American Airlines in July announced it would end its business relationship with both Etihad and Qatar Airways – although the Abu Dhabi carrier said it “remains open” to the US airline reversing the decision.

Like other US carriers, American Airlines has been emboldened by president Donald Trump’s protectionist rhetoric that has escalated an ongoing battle to curb Gulf carriers’ expansion in the US.

The three largest US carriers – American, Delta and United Airlines – claim US expansion of airlines from the Arabian Gulf breaches Open Skies agreements to regulate market competition.

They also argue that the three largest Gulf carriers - Etihad, Emirates and Qatar Airways - receive subsidies from their governments to “unfairly” spur their growth. All three deny the claims and insist they have brought substantial economic benefits to the US.

“The unfortunate decision by American Airlines to terminate a commercial relationship that benefited both carriers has left Etihad with no choice but to suspend flights between our Abu Dhabi home and Dallas/Fort Worth,” said Etihad Airways chief executive Peter Baumgartner.

“We are open to American Airlines reversing its decision to cancel our codeshare agreement so that Etihad Airways can continue the route and together protect and support American national interests and global connectivity while driving commercial value for both airlines.”

He added that the cancellation of the Dallas route is one of “several adjustments” Etihad is making to its US network next year to improve profitability.

Etihad recorded a US$1.87 billion loss in 2016 after a one-off impairment on aircraft and equity investments in partner airlines Alitalia and Air Berlin, which was outweighed by growth of passengers to a record.

“Etihad needs to focus on core revenue routes to support its growth strategy," said Mark Martin, founder of Martin Consulting.

“Revenue dependence from codeshare and partner airlines can at best be termed as ‘jam-n-jelly’ revenue; focusing on key markets operated by the airline itself offers better cost control and yield management.”

Etihad Airways sold this year its stake in Swiss-based carrier Darwin Airline, its first divestment since the airline began a review of its international investment strategy last year.

“The Dallas market is one of the thinner point-to-point routes from the Gulf so without connecting traffic it is not viable,” said John Strickland, director of JLS Consultancy.

The possibility of Etihad forging a partnership with another US carrier to service the route is unlikely for strategic and political reasons, analysts said . “Etihad will look for partnership options in the US, but in Dallas there’s not a viable alternative partner,” said Will Horton, senior analyst at the Centre for Aviation (CAPA).”

His views were echoed by Mr Strickland.

“Teaming up [with another US airline] is not feasible,” said Mr Strickland. “Fort Worth is American Airlines' hub in Dallas. Elsewhere in the southeast, Delta and United have hubs in Atlanta and Houston, but these are the three airlines who have complained against Gulf carriers.”

However, the decision is also bad news for the US, analysts said . “[Ending the codeshare] was controversial within American Airlines,” said Mr Horton. “US airlines will never be able to replace Gulf airline flights on a one-for-one basis. This is a net loss for the US and its economy and people.”

A 2016 report by Oxford Economics found Etihad had contributed a total of US$3.8 billion to the US economy, and supported more than 30,000 American jobs.

“Given American does not serve the [Abu Dhabi] route itself this would seem to represent a traffic loss for them as well as for Etihad,” Mr Strickland said.