Would Emirates-Etihad merger make sense now?
There is no denying that the Big Three airlines of the Middle East, namely Emirates, Etihad and Qatar Airways, changed the way passengers defined onboard luxury. The products they offered are at the top of their class with little-to-none global competition. The three carriers built their networks around international travel, making their respective Abu Dhabi, Dubai and Doha airports into international mega-hubs facilitating travel between the West and East.
But now, with international travel in murky waters due to the coronavirus pandemic, the business model of all three airlines is under threat. While Qatar Airways is also embroiled in a conflict with its neighbors, including the United Arab Emirates, ruling out any mergers with airlines in close proximity, the story of Emirates and Etihad is very different.
The two sides were at the forefront of rumors that would pop up from time to time. In 2017, for example, the President of Emirates Tim Clark stated that there was “value to be had working more closely with them [Etihad –ed. note].”
Whether the two would pursue a merger, Clark answered that he did not “think that will be the case but it is not my call, really,” as it was up to the shareholders of the two airlines to move that train. The two airlines are currently owned by the Dubai and Abu Dhabi governments.
In 2018, the rumor mill picked up again: this time, however, the rumors were squashed by both sides.
As the situation at Etihad Airways deteriorated and the airline slipped into further losses, failing to post a profit since 2016, running losses into the billions. In 2019, the fairly newly appointed chief executive officer of Etihad, Tony Douglas, called new rumors about a possible merger “clownesque” and “lazy”.
Could the current situation change the situation?
Fleet and operations
The two airlines operate two very similar fleets. The backbone and pride of Emirates are two aircraft types: the Airbus A380 and the Boeing 777. Etihad also has the two cockpit types in its fleet but also operates the A320, A330 and the Boeing 787 families. Furthermore, the Abu Dhabi-based carrier anticipates the delivery of new Airbus A350 and Boeing 777X jets and plans to phase out the Airbus A330.
Emirates’ order book looks eerily familiar, as the Dubai-based airline has signed up for the A350 XWB and the 777X. In addition, the company has the Boeing 787 Dreamliner on its books, further aligning the similarity of the two fleets.
They operate, however, with vastly different networks.
Emirates has carefully crafted partnerships with various airlines around the world, including such giants as Qantas or China Southern Airlines, and the low-cost carrier based in Dubai, flydubai. Etihad had a different policy. Under the Etihad Airways Partners name, the airline splashed the cash and invested in highly competitive markets, like Germany (Air Berlin) or Australia (Virgin Australia), or markets where low-cost carriers were shoving full-service carriers aside, namely India and Italy.
This could be the first bump in the road for the two to merge: what would happen to the vastly different partnership strategies? Would Etihad’s management be willing to shove their egos aside and pull the plug on their remaining investments? Or vice-versa, would Emirates be willing to give up their codeshare agreements with airlines that are competing with Etihad’s investments?
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