Oct 12, 2017

Rare comments made by Emirates about an Etihad merger

It's about 14 years since reporters have sought answers about a possible merger between Emirates and Etihad and we have almost enough words about this yesterday as heard in all of them in total

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

James Morgan photo of Emirates and Qantas A380s in a Sydney fly-over

Given the rarity of on-the-record comments from Middle East rivals Emirates and its newer, smaller and now embattled rival Etihad, about a possible merger one day, it was astonishing that this report on Reuters yesterday didn’t receive more prominent attention.

Emirates has an invaluable commercial alliance with Qantas, which although much smaller is also notably more profitable that the Dubai based global carrier, disproving the hackneyed old saying that the Australia carrier would never compete with foreign airlines effectively because of the cruel tyranny of being at the end instead of middle of networks of long haul routes.

Etihad, which is based in the nearby but rather different UAE city of Abu Dhabi, owns one fifth of Virgin Australia Holdings, and since the catastrophically ruinous failings of its investments in AirBerlin (which stops its remaining flights on October 28) and Alitalia, is reviewing all of its surviving minority investments and the fundamentals of how it does its airline activities, which include a quarter of Jet Airways in India.

Would a full merger ever make sense? How might it work in real life? Would the Australian consumer and competition authority the ACCC explode like Krakatoa did in 1883 and Mt Agung on Bali recently threatened to and no doubt will one day when it decides to definitively break the dormancy that has lasted since 1964 (after the very major eruptions of 1963.)

At the moment the ACCC, and the boards of Qantas and VAH, have no such proposal to contemplate or comment upon. As Sir Tim Clark, the CEO of Emirates makes plain, this is up to the sovereign families and airline owners in Abu Dhabi and his glitzy city of Dubai to determine, but he did give an interview, and he did mention there were areas of cooperation that offered merit.

If all the ME2 did was jointly apply their powers of persuasion over price, capacity, hot field engine performance guarantees, and other such matters in negotiations for joint orders from Airbus and Boeing, it reasonable to suspect that nothing anti-competitive might result from their respective joint activities with Qantas and Virgin Australia.

Assuming without prejudice, that Etihad continues to be a part of VAH, which may not be making it huge sums of money, but to Virgin’s relief and credit, isn’t losing it vast riches either, the Abu Dhabi carrier probably enjoys the value of code shared and connecting traffic from Australia’s second largest carrier.

Singapore Airlines, which also owns a similar sized chunk of VAH, would probably like Etihad to get less from its Virgin relationship than it does now, but that’s a different story.

If the guidance from Abu Dhabi about the reconstruction of its business model is as pressing as the figures and official commentary suggest, it can be expected to issue reassurances, or something entirely different, about Etihad’s Australian activities in the relatively near future. Which could just ruin or invigorate the end of year holiday season for the ACCC after all.


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11 thoughts on “Rare comments made by Emirates about an Etihad merger

  1. Jacob HSR

    Qatar is going where Etihad went – Italy and India.

    Qatar Airways announced on Thursday it had acquired a 49 percent stake in Meridiana

    reuters. com/article/us-qatar-airways-meridiana/qatar-airways-expects-meridiana-to-be-italys-real-national-carrier-idUSKCN1C50NT

    He is also going to fly to unconventional locations like Cardiff instead of Bristol – causing people to scratch their heads.

    I find it interesting how flying from SYD to LHR is $500 cheaper via AUH instead of DXB and cheaper still via DOH. (29 Oct one way – I used Google Flights and selected 3 transit airports).

    1. Dan Dair

      Jacob HSR,
      “fly to unconventional locations like Cardiff instead of Bristol”

      I’m not sure I understand why flying to the capital of Wales, instead of one of the smaller English regional airports, would be considered unconventional.?

      1. Jacob HSR

        Dan Dair,

        Cardiff airport gets 1.4 million passengers per year. Bristol airport gets 7.5 million per year.

        “When a child needs a bar of chocolate you don’t give it in pieces – the region was longing for an international flight and as one of the world’s only five star airlines, why shouldn’t we go daily?”


        But I hope the Doha to Cardiff flights are profitable because the Government of Wales has purchased Cardiff airport from the private sector! That just shows what a disgrace the ALP is for not buying back SYD airport.

        You might like this article about DOH to CWL and other head-scratching flights:

        Liverpool to Bacau! Doncaster to Cluj-Napoca!

        Not one but two airlines (Wow Air and Icelandair) compete for passengers between Cleveland, Ohio, and Reykjavik. Bizarrely, it’s the US city’s only direct connection with Europe.

        telegraph. co. uk/travel/news/qatar-cardiff-obscure-flight-routes/

        1. Dan Dair

          Jacob HSR,
          I wasn’t expecting such a big difference in the passenger numbers, but I would still imagine that the potential catchment for Cardiff will be greater than that for Bristol.?
          The fact that the passenger numbers were so small for Cardiff was probably why the regional government could afford to buy it.?
          It will make a lot of sense if they are able to draw some of the business back from the adjacent English airports & regenerate the airport for the industrial & population heartland of the South of Wales.

          You would imagine that Sydney airport holdings (or whatever they’re called) would be less than enthused about offloading their immensely-profitable airport for the kind of money Cardiff was sold for.?
          On the other hand, it could make sound business-sense if the Sydney or New South Wales authorities were prepared to spend enough money buying the asset & then equally-prepared to continue to gouge their citizens as the new owners of that asset.?

          1. Jacob HSR

            Even if the NSW government buys SYD airport and gouges their own voters, at least the money would be going into government coffers instead of the pocket of a private billionaire.

            Also, the politicians could be asked “why are you charging so much for parking at the airport?” and “why are you charging so much for a train ticket to the airport”?

            The opposition could promise “we will cut train ticket prices for airport travellers if we win the election”.

            As for the private owner not wanting to sell SYD airport, the answer is called a “hostile takeover”. VW did a hostile takeover of Porsche recently.

            As for Cardiff vs Bristol. Bristol is 91 km away from CWL airport by toll road and 181 km away by free road. There are also trains and buses that go from Bristol to Cardiff airport. Bristol is 166 km away from LHR airport by toll-free road.

            You can already look at the ticket prices on Google Flights. It is so much cheaper to fly into LHR compared to CWL, so I am not sure if Bristol people would prefer to travel to CWL airport instead of LHR in order to fly out to Australia, NZ, etc. But Qatar will attract the wealthier residents of Cardiff for sure.

          2. Dan Dair

            From what I read, the English & Welsh governments have agreed to abolish all of the crossing-tolls next year.?
            That’ll make the 90k look more attractive.

            (Plus Cardiff doesn’t have a ‘glass’ runway like Bristol does.!!! (maybe they’ve resurfaced it since the ‘glass’ days.???))

    2. Creeper

      EK has always charged a premium for their classes.

      Only problem is the EY and QR A380 products are miles ahead of EK and now fly all flights into SYD.

      1. Jacob HSR

        Creeper, DOH airport is regarded as one of the best on the planet and I read that DXB requires some Qantas passengers to take a bus journey to get from terminal to aircraft. Maybe DOH has sufficient aerobridges for every flight. Remember how hot it gets in Dubai!

        And Mr Baker is reputed to be the man behind DOH airport. He might be the Warren Buffett of aviation! (investing in Italy after Etihad’s investment in Italy has gone kaput and also investing in India while I am not sure how Etihad’s investment in India has done). He is certainly unconventional if you look at his CBR to SYD flights using QR aircraft. Air India did the same thing by flying MEL to SYD to DEL and gave it up due to a lack of profits. But QR thinks it is worth flying CBR to SYD to DOH?

        1. Creeper

          The Canberra experiment is just a way to get around the system to get more Sydney flights. In the future when they increase the rights between Qatar and Australian capitals, the Canberra link will suddenly vanish. In the meantime subsidies no doubt paid by the Canberra Circus will fund the losses until they drop it.

  2. Cantbeeffed

    That metaphor was absolutely excruciating.

  3. [email protected]

    It would be interesting to see who would have the upper hand in any merger. Whilst Etihad may have made some basket case investments, the state of Abu Dhabi has the money. The 2008 financial correction brought Dubai to its knees, requiring significant Abu Dhabi money to bail it out. The question is to ask how much Emirates has over committed to new aircraft purchases.

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