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divestitures

Jul 21, 2017

Etihad's Darwinian evolution falls extinct, who is next?

Darwin Airline's evolution as an Etihad investment in regional European flights has turned fossil

A comparatively rare SAAB 2000 turboprop in Darwin service at Lugano

The dismantling of Etihad’s network of minority stakes in other airlines has begun with the sale of Swiss regional carrier Darwin Airline to a new subsidiary of Slovenia’s Adria Airways.

The development again raises the as yet unanswerable question as to the fate of Etihad’s one fifth stake in Virgin Australia.

Etihad expanded rapidly in scope by a policy of purchasing minority stakes in a diverse range of carriers under the management lead by the now ousted CEO, James Hogan. The Abu Dhabi based carrier which had set out to emulate the success of neighboring Dubai based giant, Emirates,  had taken a one third stake in Darwin.

However it was massively unsuccessful and costly investments in airBerlin and Italian carrier, Alitalia, which would have cost Etihad’s sovereign owners more than $AU 1 billion at prevailing exchange rates,  which destroyed the Hogan strategy.

AirBerlin was outclassed by Germany’s major airline Lufthansa, wherever they competed with each other, and Alitalia, without putting too fine a point on it, was trashed by militant union resistance to restructuring, which saw Etihad refuse to commit more money to its operations. The fates of airBerlin and Alitalia, are unknown.

The final reckoning when it comes to those Etihad investments, which are assumed to be likely to be written off or sold for less than cost, has yet to be made. Etihad under previous management had professed continued support for its largely profitless involvement in Virgin Australia, and has continued to grow its apparent success in the Australian international air travel market under the post Hogan management (which is still taking shape.)

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One thought on “Etihad’s Darwinian evolution falls extinct, who is next?

  1. Dan Dair

    I imagine that will be that for Alitalia then.?

    I can’t envisage any other investor coming forward to take Etihads’ place,
    unless they get the stake for next to nothing, then just hang around until the end of the airline & they can sell what remains of the assets.?
    Of course, that assumes Alitalia actually has any aircraft that have value on the second-hand market.?
    (Maybe Etihad will just hang on to their shares, but just resign from the board & wait for the end themselves.?)
    I’d be totally amazed if the Italian government was able to justify putting-in any more public money after Etihads’ departure.?

    Regarding VAH, Etihad has no special reason to pull-out right at the moment.
    The management & the staff all seem to be behind their airline, so as long as they can make serious inroads into returning to profitability, I’d have though Etihad will continue to give them the support they’ll need to so they have the opportunity make it happen.?