Etihad president and CEO James Hogan, after securing half of Alitalia.

There is far more to Etihad’s ambitions in Australia than the Airbus A380 that upscaled its Sydney-Abu Dhabi services today.

Sometime in the near-ish future Australian and European flag carrier access to their respective markets is going to need similar upward revisions, and Etihad, unlike its much larger Middle East competitor Emirates, has positioned itself for a large yet indirect slice of the action through a 49 percent stake in Italy’s Alitalia and almost 30 percent slice of German’s airBerlin, apart from strategic investments in Air Serbia and Aer Lingus, plus about one quarter of India carrier Jet Airways on the side.

There haven’t been major continental European airline flights to Australia this century, and minor player Olympic barely survived as a flying metaphor for the state of the Greek economy until 2002. Whether the the UK stays or goes when it comes to being a part of the EU, its major flag carrier British Airways has shrunk into the obscurity of a 777 a day between London and Sydney and wannabe Virgin Atlantic floundered around dreadfully and eventually fled.

Thus the Australia-Europe market has largely become a battle ground between two middle East carriers, a so far unequal contest between Emirates and Etihad,  in which Qantas has an alliance with the former, while Virgin Australia has sold more than 24 percent of its holding company equity to the latter and does its own token flights to Abu Dhabi for onward connections.

If Etihad can’t get the same bilateral access to the Australia-UAE market as larger, longer established Emirates has so far secured, it can nevertheless buy as much as 49 percent of European carriers that the EU must grant future approval to operate to this county as treaties come up for renegotiation, assuming that its gets sufficient influence over those airline managements to persuade them to return (in the case of Alitalia) or pick up where Lufthansa left off, in the case of airBerlin.

Etihad's Airbus A380, now well on the way to first Sydney arrival

The will or capacity of the Asia hub carriers to hold the line against Dubai and Abu Dhabi is in doubt. Singapore, Bangkok and Kuala Lumpur just don’t seem to have what it takes anymore, perhaps because they have shifted focus onto regional low cost traffic opportunities.

What Etihad is doing in Europe is the flip side of the loosely enunciated Qantas interest in selling off up to 49 percent of a restructured Qantas international to benefit its owners while similarly helping such a spin off expand the Australian flag carriers now somewhat reduced long haul network.

(This is not to second guess exactly what Qantas is up to, which may be nothing or something.  Qantas has signaled that it will probably introduce Boeing 787-9s toward the end of this decade, but the capacity of the Dreamliners is so small that it couldn’t be assumed they would necessarily fly all the way into Europe against much larger 777s, A350s and of course A380s.)

But the result so far has been that the enterprising Emirates juggernaut has grown itself into the European market via its Dubai hub, while leaving its near neighbour in the UAE, Etihad, to devise an alternative strategy, which it had previously ruled out, of buying equity in carriers it would otherwise compete with.

EU rules allow broadly similar foreign carrier equity in its airlines as Australia does in Qantas after recent changes to the original restrictions in the Qantas Sale Act of 1992.

For the moment, the Etihad A380 is the head turner. The product innovations are sensational in the premium cabins, and its economy class cabin in the big Airbus is notably more amenable than the offerings on any alternative services (including its own 777s and 787s).

But the real story will be what happens next, as Etihad’s revitalisations of Alitalia and airBerlin kick in. The Italian and German markets are of substantial importance to Australia whether for tourism or business opportunities, and Emirates is unlikely to have it all its own way for a further decade.

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