Perhaps surprisingly, Etihad plans to invest in global carriers at a time when the Gulf aviation industry is crowded.
In recent years, Etihad Airways invested in a number of carriers and have bought a 29.2 percent stake in Air Berlin and a ten percent holding in Virgin Australia among others, the Financial Times reported on Wednesday.
Etihad is aiming to extend its international partnerships by establishing code-share agreements and purchasing minority shares in airlines from countries stretching from Germany to Australia.
However, rival carriers, such as its neighbor Emirates Airlines of Dubai, have established their influence in the aviation market by developing unique routes.
Despite this competition, Etihad’s chief executive, James Hogan, said that the carrier is not planning to undertake a “buying spree.”
“We may recommend to our board one or two more relationships,” he said during an interview with the Financial Times.
Etihad is among other Gulf airlines, including Qatar Airways and Emirates, which are posing a challenge to Europe’s British Airways and Lufthansa.
Airlines from the Gulf are not only competing internationally but also in the region, the top prize being the leadership of the aviation industry.
Although Etihad is officially the national airline, a fact promoted during in-flight announcements, it is Dubai's Emirates that wins out in the popularity stakes.
With 71 aircrafts, 86 destinations and 41 code-shares, Etihad Airways covers over 300 destinations in total.
While Emirates has a larger fleet, it is Etihad’s partnerships which have allowed the airline to challenge its rivals. Its reach extends to 100 destinations and more than 300 cities via its partnerships.
Expansion into India
Last month Etihad, which provides limited disclosure about its financial prospects, said that it was seeking a possible deal with an Indian carrier.
Meanwhile, Kingfisher Airlines has issued a statement which indicates that the Indian carrier was in talks with the Gulf carrier.
India’s Jet Airways is the front-runner for an investment by Etihad Airways according to a senior Indian government source who added that the Gulf carrier could pay up to $330 million for a 24 percent stake in the Indian company, Reuters reported on Wednesday.
The sheer number of passengers that come from India and its proximity to the Gulf region has been the pull factor encouraging Etihad to expand into the Asian country.
“Not many European airlines or American airlines fly to the secondary cities of India, Pakistan and Bangladesh,” Hogan told the Financial Times.
However, the airline is clear about one element, as it aims to grow its equity portfolio; it does not want to be a major shareholder in other airlines.
“What I don't want to get caught up in is getting involved in managing these airlines day to day,” says Hogan, “we’ve got enough on our plate.”
Etihad’s rapid growth has recently been questioned by its western counterparts, who claim that the airline is a threat as it has an unfair advantage due to profit from low fuel taxes, low airport levies and high government infrastructure spending.
Hogan said that Etihad is not supported by the Abu Dhabi state. “We don't get free fuel; there is no form of subsidization from the government to the airline,” he added.
Because it is not traded publically and gives only selective figures, Etihad’s financial performance is hard to measure. Last year, it published its first profit data, reporting a net income of $14m. The airline only disclosed revenue, which rose 19 per cent to $1.3bn from $1.1bn a year earlier.
So far, Etihad reported that it borrowed $6 billion in external finance and is using Islamic finance to fund its aircraft acquisitions.
With the aim to expand Etihad’s airline fleet further, questions are being raised as to whether there are sufficient resources to support the move in such a competitive Gulf region.