News
Etihad and Lufthansa conclude $100 million cooperation agreement
February 3rd 2017
As recently as last year, Lufthansa Group and its European and U.S. peers stood united against “the subsidized evil from the Middle East”. Read More »
Fast forward to this week and Etihad Aviation Group and Lufthansa Group signed a comprehensive “commercial partnership agreement” covering maintenance, repair and overhaul (MRO), catering and codesharing. And, if the rumours are true, Etihad Airways could join the Star Alliance network before year-end.
Addressing a press conference in Abu Dhabi on Wednesday, the CEOs of both companies highlighted their views that the partnership was critical to competing effectively in today’s “complex and highly competitive global market”.
Etihad Aviation CEO, James Hogan, said: "Our collaboration with one of the aviation industry's most established and recognised brands is undoubtedly the most significant non-equity partnership with an airline we have ever announced,” and added this was the foundation of a much wider strategic collaboration between the two airline groups.
Etihad and Lufthansa have agreed that Lufthansa's LSG Sky Chefs will be Etihad’s caterer in 16 cities in Asia, Europe and the Americas, for four years; a contract that will make it the Gulf carrier’s largest catering supplier outside the UAE.
The Emiratis also signed an Memorandum of Understanding with Lufthansa Technik to explore MRO opportunities across Etihad and its equity partners and that will seek synergies with Etihad Airways Engineering. The new partners also intend to investigate closer ties between their freight, procurement and passenger services.
From this week the airlines will codeshare on flights between the UAE, Frankfurt and Munich and Etihad will place its code on Lufthansa flights to Bogota and Rio de Janeiro. The new partnership allows Lufthansa to tap high growth markets in India and South Asia via a quality carrier from Abu Dhabi. Etihad, in turn, has access to South America via Germany. The UAE airline will terminate its daily flights to Sao Paulo, its sole link to the continent, in March.
Lufthansa has shed Manila, Ho Chi Minh City, Kuala Lumpur and Jakarta in the last five years and reduced frequencies and equipment on several routes to Japan. A tie-up with Etihad presents an effective path for Lufthansa to rebuild market share in the region.
After extended negotiations, Lufthansa Group agreed in December to wet-lease 38 single aisle aircraft from underperforming Etihad partner, airberlin. Nevertheless, differences between Etihad, Lufthansa and their leaders remain.
Lufthansa CEO, Carsten Spohr, said it was “not a secret that Lufthansa has always been and remains an opponent of state subsidies” but added he could have a “different perspective to his partners and still find common areas of operation”.
In the meantime, Spohr said: “There is more and more indication that, as we say in German, trees don’t grow to the sky in Gulf aviation. Finding smart partnerships, like Etihad has done with us, and limiting growth will play a bigger role in the next 12 months [in the Gulf] than in the last ten years.”
Speaking at Lunch with Orient Aviation in Hong Kong last month, Malaysia Airlines CEO, Peter Bellew, predicted that massive consolidation, as previously witnessed in the U.S., was going to happen in Asia and the Gulf.
