x Abu Dhabi, UAESunday 23 July 2017

Next stage of airberlin partnership is close, says Etihad chief executive

Etihad already owns 29.2 per cent of the German airline. If it were to cross the 30 per cent threshold, it would, under German regulations, have to make an offer to other shareholders at the average stock price for the past 90 days.

Etihad is also in the final stages of due diligence of Alitalia for a potential stake, said James Hogan, Etihad's president and chief executive. Silvia Razgova / The National
Etihad is also in the final stages of due diligence of Alitalia for a potential stake, said James Hogan, Etihad's president and chief executive. Silvia Razgova / The National

Etihad Airways is in the final stages of negotiating the next stage of its partnership with airberlin, as the German carrier faces uncertainty over the future of its ownership.

“Entering into the partnership with airberlin gave us access to Germany,” James Hogan, the president and chief executive of Etihad, said at the Global Airspace Summit in the capital, without providing further details. “For us all our key objectives have been met. We are in the final stages of negotiating the next stage of our partnership.”

Airberlin meanwhile has delayed the release of its annual results. It has said they will be postponed until no later than the end of this month as it is working on the recapitalisation. The airline’s shares have been volatile in recent weeks on lack of clarity over its future.

Airberlin said last week that it was in continuing and advanced discussions with its shareholders and other parties on measures for a recapitalisation, which would strengthen the equity and liquidity position of the Air Berlin Group.

One of the scenarios is for Etihad to increase its stake in airberlin or the carrier going private.

Etihad already owns 29.2 per cent of the German airline. If it were to cross the 30 per cent threshold, it would, under German regulations, have to make an offer to other shareholders at the average stock price for the past 90 days.

However, if airberlin were to go private, then Etihad could lift its stake to 49.9 per cent before it confronted the next regulatory hurdle.

That hurdle: if Etihad were to become a majority owner of airberlin, the latter could lose landing rights at European airports to carriers with majority European ownership.

Etihad’s growth strategy has relied heavily on expanding its route network through “equity alliances”, in which it invests in carriers that help it to expand its global reach in strategically important regions. In 2013, Etihad grew its equity alliance to seven – comprising Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways and Etihad Regional – formerly known as Darwin Airline.

Etihad is currently holding talks for a potential stake in Altalitia, which would be its biggest acquisition to date.

“Alitalia we are in final stages of due diligence at the moment. The mandate that I have from the shareholders from the board is that if we can achieve an agreement that meets the commercial mandate, then I will come back and represent that to the board,” Mr Hogan said.

Meanwhile, Camiel Eurlings, the chief executive of KLM, also a shareholder of Alitalia said: “I really hope that James and the team of Air France and KLM would prove that we will also manage a deep and structural partnership of a legacy carrier of Europe.

“I think we can do this. It’s not easy, but I think we can deepen it and share our revenues and make a structural win-win … It’s absolutely certain that the Middle East will play a bigger role, but the Middle East will never do it alone. We need a partnerships of people and partners that trust each other,” said Mr Eurlings.

In 2012, Etihad entered into a codeshare agreement with Air France-KLM, which marked a turning point in improving relations between European flag carriers and Gulf airlines.

Commenting on the benefits of partnerships, Mr Eurlings said: “We don’t have the ambition to be big in India. But with a partnership with Etihad, we can have it and the same goes to Australia. On the other hand, we are very strong in South America and this can be of value for Etihad.”

Through its partnership strategy, Etihad grew its network to 400 destinations in 2013. It also said that the strategy “allowed significant business synergies and cost savings”.

selgazzar@thenational.ae

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