BEIRUT

Regional

Etihad set to expand empire of ailing carriers

File - A news conference to launch Etihad Regional airline at the airport in Zurich January 16, 2014. (REUTERS/Arnd Wiegmann)

DUBAI: From Serbia to the Seychelles, Etihad Airways Chief James Hogan is being hailed as a savior for his willingness to bail out cash-strapped carriers.

Since 2011, the Australian has acquired stakes in seven companies spanning Aer Lingus on Europe’s western fringe to Virgin Australia Holdings Ltd. on the shores of the Pacific, feeding more traffic via Abu Dhabi, Etihad’s desert hub with a population of less than 1 million.

But his next move may be the boldest yet: Alitalia SpA, Italy’s national carrier, which has been dogged by bloated payrolls, state meddling and chronic losses.

He is currently negotiating commercial terms with Alitalia after weeks of scrutiny that delayed a deal beyond initial the April 30 deadline set in February.

Hogan’s investment in a clutch of ailing airlines over which he has limited control comes a decade after a similar strategy led to the collapse of Swissair, and as other top industry players eschew partial holdings in favor of global alliances.

What sets Etihad apart is funding from an oil-rich state eager to match the growth of Qatar Airways Ltd. and Emirates, the No. 1 international carrier based less than 100 miles away in Dubai.

“This is a long-term play,” Hogan, who became chief executive officer in 2006 after running Bahrain-based Gulf Air, said in one of a series of interviews with Bloomberg.

“This isn’t for 12 months, this is for the next 20, 30, 40 years.”

Founded in 2003, 18 years after Emirates and nine after Qatar Airways, Etihad needed something more than organic growth to gain global scale, according to Hogan, 57.

His first move was to take a 2.99 percent holding in Air Berlin PLC in 2011, lifting it to 29 percent months later. He has since added stakes in Air Seychelles Ltd., Aer Lingus Group Plc, Virgin Australia, Air Serbia and Jet Airways India Ltd., and is seeking regulatory approval to invest in Swiss regional carrier Darwin Airline.

Investing in perennially unprofitable Alitalia, where losses have exceeded 1.1 billion euros ($1.5 billion) in five years, may be a tougher challenge. While the Rome-based carrier tops Europe’s third-largest outbound travel market, it is under siege by a pack of low-cost carriers led by Ryanair Holdings PLC and easyJet PLC over short-haul routes.

Hogan’s critics draw comparisons with Swissair’s hotchpotch collection of stakes in carriers such as Belgium’s Sabena SA, which led to its collapse with debts of almost 17 billion francs ($19 billion) in October 2001.

“Swiss ... also acquired a lot of ailing carriers,” said Simone Menne, Chief Financial Officer at Deutsche Lufthansa AG. “But Etihad has much deeper pockets.”

Abu Dhabi is “very supportive” of Etihad’s vision, Hamad Abdullah al-Mass, executive director for international economic relations at the emirate’s Department of Economic Development, said. Indeed, it is funding a new 30 million-passenger terminal.

 
A version of this article appeared in the print edition of The Daily Star on April 11, 2014, on page 5.

Recommended

Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Summary

From Serbia to the Seychelles, Etihad Airways Chief James Hogan is being hailed as a savior for his willingness to bail out cash-strapped carriers.

Since 2011, the Australian has acquired stakes in seven companies spanning Aer Lingus on Europe's western fringe to Virgin Australia Holdings Ltd. on the shores of the Pacific, feeding more traffic via Abu Dhabi, Etihad's desert hub with a population of less than 1 million.

What sets Etihad apart is funding from an oil-rich state eager to match the growth of Qatar Airways Ltd. and Emirates, the No. 1 international carrier based less than 100 miles away in Dubai.

Founded in 2003, 18 years after Emirates and nine after Qatar Airways, Etihad needed something more than organic growth to gain global scale, according to Hogan, 57 .

His first move was to take a 2.99 percent holding in Air Berlin PLC in 2011, lifting it to 29 percent months later.


Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here