The financial woes of Etihad have been well documented.
It pursued what can only be described as an absolutely disastrous strategy of acquiring minority stakes in troubled European airlines that haemorrhaged cash. It has been heavily loss making, having reported a loss before exceptional items of USD$ 1.52 billion for 2017.
Etihad has abandoned its strategy of pursuing aggressive growth. It has been cutting routes such as Dallas Fort Worth, Entebbe, Jaipur, San Francisco, Tehran, and Venice.
It has also been reviewing its expansive aircraft order book which has included 21 Boeing 787-9, 30 Boeing 787-10, 25 Boeing 777X and 62 Airbus A350 wide body aircraft. It had also been seconding pilots to Emirates.
Bloomberg has reported today, Thursday 20 September 2018, that Emirates is in talks to acquire Etihad. It includes an official non-denial denial from Emirates and Etihad spokespersons that neither “comment on speculation”.
There are clear attractions to Emirates in not only eliminating a nearby rival but also having access to its aircraft order book. It could also substantially increase Emirates’ presence in London.
Given the close proximity of Abu Dhabi to Dubai it’s unlikely that Emirates would pursue a “dual hub” strategy (think BA’s unsuccessful dual “hub without the hubbub” strategy at Gatwick in the 1990s) and is likely to be more focused on point-to-point traffic for Abu Dhabi.
Emirates currently operates six Airbus A380 departures from London Heathrow with additional flights from Gatwick and Stansted.
With Etihad having three departures a day from Heathrow to Abu Dhabi and it also owning Alitalia’s slots, which currently operates six daily departures to Italy, a deal could more than double Emirates’ capacity at Heathrow. It goes without saying this would be a major competitive headache for many rival airlines.
Looking further afield, Etihad also owns a stake in Virgin Australia. Given Emirates’ partnership with Qantas, Etihad would have to dispose of its stake in Virgin Australia and its abandon its partnership for competitive reasons.