Etihad & Lufthansa extend cooperation

Etihad Aviation Group and Lufthansa German Airlines, today unveiled details of a new commercial partnership. The press conference held today included signing of the agreement between James Hogan, CEO and Group President – Etihad Aviation and Carsten Spohr, Lufthansa Group Chairman and CEO and was aired live over the internet. The press conference started with James Hogan briefing about his exit from Etihad but not taking any questions about the same.

The two airline groups have concluded a US $100 million global catering agreement and a Memorandum of Understanding (MoU) to cooperate in aircraft maintenance, repair and overhaul.

The four-year catering contract will see Lufthansa’s LSG Sky Chefs provide catering services to Etihad Airways in 16 cities in Europe, Asia and the Americas. This makes LSG the largest provider of catering services to the UAE’s national airline, outside its Abu Dhabi home base.

Etihad Aviation Group and Lufthansa Technik (LHT) also signed an MoU to explore cooperation in maintenance, repair and overhaul services across Etihad Airways and its airline equity partners, and opportunities for synergies with Etihad Airways Engineering. Etihad holds 24% equity in Jet Airways and is the lowest stake it has in any of the 7 airlines that it has equity holding.

The previously announced codeshare between the two airline groups goes on sale today, for flights between Abu Dhabi and Germany. Lufthansa will place its ‘LH’ code on Etihad Airways’ twice daily flights between its Abu Dhabi hub and both Frankfurt and Munich. Etihad will put its ‘EY’ code on Lufthansa’s long-haul, non-stop intercontinental services between its home base of Frankfurt and Rio de Janeiro in Brazil and the Colombian capital, Bogota as soon as government approval is obtained.

The codeshare agreement will grow both carriers’ global networks, giving Lufthansa increased access to important feeder markets throughout the Indian Subcontinent via Abu Dhabi, while Etihad will gain access into South America through Germany. One wonders if this will halt further expansion of Lufthansa into India, one of the major markets for Etihad as well as Lufthansa sees Lufthansa operations to 5 destinations in India from Frankfurt and 2 from Munich, while Etihad operates to 11 destinations in India.

To facilitate both connectivity and the customer experience associated with this codeshare, the Abu Dhabi-based airline will also move its operations at Lufthansa’s hubs, from Terminal 2 to Terminal 1 in Frankfurt, and Terminal 1 to Terminal 2 in Munich.

James Hogan termed this deal as “the most significant non-equity partnership with an airline we (Etihad) ever announced”

File photo of Lufthansa A380 at Frankfurt. Etihad will shift all its flights to this terminal

File photo of Lufthansa A380 at Frankfurt. Etihad will shift all its flights to this terminal

This deal is continuation of the agreement signed between The Lufthansa Group in December 2016 with airberlin, in which Etihad holds a 29 per cent stake, for the wet-lease of 38 aircraft. Lufthansa’s point-to-point carrier Eurowings will wet lease 33 aircraft, and Austrian Airlines, a Lufthansa Group airline, will take on five aircraft. The agreement between Eurowings and Air Berlin, signed on 16 December 2016, will last for six years and is slated to begin on 10 February 2017 when the first aircraft starts operating for Eurowings.

The obvious question being asked is about inclusion of Etihad in Star Alliance in the long run. With the major alliances thinning lines and alliance members working jointly with carriers across alliances, it may not matter a lot if Etihad joins Star Alliance or not. For Etihad close home, Qantas – A one world member has a deal in place with Etihad rival Emirates instead of fellow one world member Qatar.

As airlines world over report record profits for the last year due to lower oil prices, the Middle Eastern airlines have seen their profits come under pressure. When the oil is low, the airlines world over clock record profits while Middle Eastern carriers suffer and when the oil is high it’s just the reverse.

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