Etihad Airways CEO says acquisitions not for 'control' but for 'growth'

September 18, 2014 4:38 am 

ABU DHABI, Sept. 17 — The CEO of Etihad Airways sought to allay concerns about the company's recent acquisition of Alitalia on Wednesday, saying the move was not about controlling the industry but about helping airliners "to grow together."

The strategy of buying into other airliners like Alitalia aims to give airliners the room "to grow together," said James Hogan, the president and chief executive of Abu Dhabi-state owned Etihad Airways.

He said the recent acquisition of Alitalia does help open Etihad's network into the lucrative European market.

Speaking at the International Air Transport Association's first world financial symposium, which began in Abu Dhabi on Sunday, Hogan acknowledged worries expressed by some industry observers about the purchase.

"There were concerns about our move, but it is not about control, it is about growing together and bringing our partner airlines back to profitability," Hogan said.

Under European law, any European carrier has to be effectively controlled by more than 50 percent by a European Union member state of European Union citizens. The Gulf's purchases of large stakes in European companies have stirred some concerns.

Earlier this year in April, after months of rumors and negotiations, Etihad bought 49 percent of financially troubled Alitalia, Italy's state-owned carrier, for 1.76 billion euros (at that time US$ 2.4 billion).

Etihad announced in August it would restructure Alitalia's 560 million euro debt (US$ 763.63 million) and bring the loss-making airline back into profitability by 2017.

Hogan pointed out that Etihad opted for the business model of buying into other carriers, such as Alitalia and Air Berlin, and of partnering with others through code share agreements, because Etihad's fleet of 102 aircraft is only half the size of its main rival Emirates Airline's 231 aircraft in Dubai.

"The biggest challenge for airliners remains cost cutting," he said, adding that the challenge can be tackled through partnerships.

"There is no ideal business model based on a rule book in the airline industry," Hogan said. "You have to be creative and flexible."

Hogan said Air Serbia and Air Seychelles would also become profitable this year, proving that Etihad's global buying spree was beneficial for its partners. Etihad holds a 49 percent stake in Air Serbia, which it bought in August 2013, and a 40 percent share in Air Seychelles.

Germany's budget carrier Air Berlin, in which Etihad holds a 29.2 percent stake since December 2011, however, remains weak.

Air Berlin lost 315 million euros (US$ 408 million) in 2013 and 210 million euros (US$ 272 million) in the first quarter of 2014, despite massive job cuts and reductions in its destinations network.

Hogan emphasized that Germany is the most important market in Europe for Etihad at the moment. And the German transport ministry in Berlin is currently examining if Etihad's stake in Air Berlin complies with European Commission rules.

He said Etihad was eying US$ 7.3 billion of revenue in 2014, after generating US$ 6.1 billion in 2013. (PNA/Xinhua)

LGI/UTB

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