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News / Is Etihad Airways now in deep water?
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Monday, 09 January 2012 08:33

Is Etihad Airways now in deep water?

Recent upgrading of stake in Air Berlin will cost a lot of money

When Etihad Airways recently bought a stake in Air Berlin, getting open access to the German capital, it looked like the carrier had scored a significant victory against its Gulf rivals. But it may find itself heavily burdened by the German airline’s serious financial difficulties. Etihad raised its stake in Air Berlin last month from 3% to nearly 30% in exchange for €73 million and lending it a much needed $255 million. In return, the Abu Dhabi-based airline obtained a codeshare agreement giving it access to Air Berlin's extensive European short-haul network and to Berlin ahead of Emirates, which has been lobbying to get into the German capital for years.
Etihad does not have control of decision-making at Air Berlin, but the move is a frustrating one for Emirates. It may give Etihad access to oneworld, the alliance Air Berlin is set to join this year, and gives it valuable landing slots. It’s a one-off deal that Emirates and Qatar Airways will find hard to match.
But a number of airlines have bought stakes in other carriers only to realise the financial mess they got into later. Etihad will need to demonstrate deep pockets to cover Air Berlin’s debts. “We view this as an irrational move by a very well-funded business, seeking to expand its footprint globally,” wrote industry analysts at the Royal Bank of Scotland.
Arabian Business

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