In airline industry, there are three major alliances – Star Alliance, One World and Sky Team. Many full service scheduled carriers (not Low Cost Carrier) are part of one or the other alliance. In last few years, we have seen Etihad Airways, the national airlines of the United Arab Emirates buying stakes in other airlines and spreading their wings inorganically.
Currently, Etihad Airways owns equity in 6 carriers, which are spread across Europe and Asia. They are:
- Aer Lingus – 4.11% Equity owned by Etihad
- Airberlin – 29% Equity owned by Etihad
- Air Serbia – 49% Equity owned by Etihad
- Air Seychelles – 40% Equity owned by Etihad
- Jet Airways – 24% Equity owned by Etihad
- Virgin Australia – 19.9% Equity owned by Etihad
Etihad Airways and their equity partners together cover over 900 destinations globally. Very soon, Etihad is going to add Alitalia with a 49% stake which will add over 100 more destinations to its access, thus crossing the important 1000 destinations mark. The 1000 destination mark bring Etihad closer to One World Alliance (comprises of 15 airlines) and about 30% short of world’s largest alliance – Star Alliance.
Interestingly, the global alliances in the industry are partnering together to drive benefits through combined network and sharing infrastructure, but no equity partnerships. With Etihad, it is taking equity route to form such large network and infrastructure sharing along with loyalty benefits.
Etihad has taken some large and risky bets by investing in loss making Jet Airways and now taking up significant stake in ailing Alitalia.
Is it the formation of 4 alliance and a force to reckon with or the formation of a bubble with some large bets? Time will tell!