Handelsblatt Exclusive

Sheikhs Discussed Emirates-Etihad Merger

Tarmac Wait-Angry Flight
Etihad's hub in Abu Dhabi is only 140km from its rival Emirates' base in Dubai. Source: AP

The ruling familes of the United Arab Emirates, which control the Emirates and Etihad airlines, have held talks about possibly merging the two airlines, Handelsblatt has learnt from several sources.

The Gulf carriers are experiencing turbulent times after years of growth and expansion: both are struggling with falling profits and a changing industry. The possibility of consolidating the two state-owned carriers would not be easy, and require a huge amount of effort, but is clearly not out of the question anymore.

Etihad has in the past said it is not even considering scenarios that would include a closer association, let alone a merger, with Emirates. The airline said that there are currently no talks between the two companies, while Emirates did not respond to a request for comment by Handelsblatt.

But there is change in the air. The Gulf states have three big airlines: Emirates, Etihad and Qatar Airways. All three have experienced substantial growth since their inception, despite operating in a region with a small number of homegrown passengers. The UAE has a total population of about nine million: the same as London.

This small population had not impacted the airlines for several years. But times are changing. Emirates announced a 75 percent fall in half year profits in November. Etihad meanwhile announced at the end of last year that it would evaluate its global strategy as it continues to battle with persistent losses from its stakes in German airline Air Berlin and Italian flagcarrier Alitalia.

The Gulf-based airlines are reaching their limits and must change their operations to stay competitive. Lufthansa and Etihad last month agreed to a code-sharing partnership on flights from Frankfurt to Rio de Janeiro and Bogota.

Lufthansa boss Christian Spohr said last month in Abu Dhabi that he expected more rationalization among the Gulf Airlines, but did not specify what he meant.

Etihad and Emirates have a lot of overlap. Their respective hubs in Abu Dhabi and Dubai are only 140 kilometers apart, for example.

“Economically and strategically, a cooperation, or maybe even merger, between Etihad and Emirates would without a doubt make sense,” said Gerald Wissel of Hamburg-based aviation consulting agency Airborne Consulting. “But a lot of national sensitivities would have to be overcome. It’s not a simple topic.”

Continue reading: A shared past and the hurdles to a merger

 

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