As airlines in the Middle East were established in the late-20th/early-21st century, they became the poster children of their respective countries. Such airlines as Emirates, Etihad and Qatar Airways were, and still are, a tool to market their respective home states to a very wide audience. The unparalleled luxury onboard Middle East-based airlines is recognized all over the world, with multiple awards given to the Big Three of the Middle East.

They do also serve the main purpose of an airline – to connect the dots all around the world, which indirectly leads to economic growth: whether through tourism or ease of doing business, no one can deny the benefits of having a flag carrier.

However, two Gulf airlines, most notably Etihad Airways and Qatar Airways, were also very prominent in buying and investing in foreign airlines. The long list of the duo’s investments also includes a sub-section, which indicates airlines that went bankrupt. While Qatar Airways was much more careful in picking their investments, apart from a collapsed Air Italy in early-2020, the Doha-based airline has played it safe with stakes in Cathay Pacific, China Southern Airlines, International Airlines Group (IAG) and LATAM.

With the backing of Qatar Airways, the growth plans of Air Italy were very ambitious. However, the airline has reportedly hit a financial wall, which requires more cash to climb over to keep operating.

Etihad, meanwhile, saw a fair share of its investments collapse right in front of its eyes: Air Berlin, Alitalia, Jet Airways and most recently, the airline that is still holding on by a straw, Virgin Australia. At first glance, the investments were risky: Alitalia had constant issues with its unions, resulting in high operating costs; Air Berlin faced a behemoth in Germany, Lufthansa, as well as low-cost carriers from Europe; while Jet Airways, much like Air India and Vistara, struggled to contain its low-cost competitors. The latest to fall, Virgin Australia, embarked on a Game Change program in 2010. But with only one profitable year, 2012, under its belt, the airline finally entered into voluntary administration on April 21, 2020.

Virgin Australia entered voluntary administration on April 20, 2020. The company confirmed the news, stating it was forced to take the step after failing to secure financial aid from the Australian government or other sources amid the global COVID-19 crisis. If it fails to secure fresh funds, the airline risks running out of cash within six months, according to an American credit rating agency. 

However, were they actually risky?

Trouble in Berlin

The Abu Dhabi-based airline purchased a 29% stake in Air Berlin in late-2011. The German airline met its newest investors with a mountain of debt of more than $652 million (€600 million). Etihad gave a hefty sum for the carrier: it paid $79 million (€73 million) for the stake and it would lend $213 million (€196 million) to Air Berlin in order for it to stay afloat.

Air Berlin had ambitious plans, including joining the oneworld airline alliance, which it did in 2012. But the ambitious plans did not help the carrier’s financial position. From 2009 until its eventual demise in 2017, Air Berlin had only one profitable year.