Etihad Airways in joint venture with China Eastern to develop more routes

Abu Dhabi airline sees potential to sign more commercial deals with airlines in other regions, chief executive tells The National

An Etihad flight arriving at Beijing Daxing International Airport. Photo: Etihad

Etihad Airways signed a joint venture with China Eastern Airlines as the two companies seek to develop and grow routes between the UAE and China.

The agreement, signed in Abu Dhabi, is the first such commercial alliance between a Middle Eastern and Chinese airline and will create a stronger combined network, Etihad said in a statement on Wednesday.

Etihad sees potential to sign more of these deals with airlines operating in other regions, chief executive Antonoaldo Neves told The National.

“I hope so. We are really open for that,” he said.

“We believe this is going to change the industry landscape in the Middle East for the next 10 years. We invested a lot of time on this over the past year. We’re going to set up the first full commercial JV with a Chinese airline in the Middle East.”

Mr Neves said he expects regulatory approval for the deal within six months, for the joint venture to commence in early 2025.

Etihad will share trunk routes with China Eastern, similar to the Lufthansa-United partnership, Mr Neves said, clarifying that neither of the airlines are making equity investments in the other.

“This is like what IAG has with American Airlines and like what Air France-KLM have with Delta,” he said.

“It’s a revenue-sharing partnership and we share also the sales.”

A revenue-sharing model is one in which a collaboration of airlines is able to co-operatively share resources, such as available seat capacity and revenue.

“Today, I have four flights a week to Beijing," Mr Neves said. "We can sit at the table together with them [China Eastern] and co-ordinate. I can say, 'why don’t you add three flights a week to fill in those days that I don’t fly and we share the revenue?' Or I can say, 'why don’t we go double-daily and I do the night flight and you do the day flight?'."

It means more frequency, revised flight schedules and seamless frequent flyer programmes, he added.

In terms of the route, the scope of the joint venture is the Gulf and China. “We’re going to share the revenue proportionally to the amount of seats we have on each route," Mr Neves said.

Etihad Aviation Group chairman Mohamed Al Shorafa said the move “signifies a deep commitment to strengthening the bonds between the UAE and China, while fostering deeper cultural and economic ties”.

The UAE and China signed agreements to boost co-operation in investments, the Belt and Road Initiative, industry and technology, and tourism during President Sheikh Mohamed's visit to Beijing last week.

China is the UAE’s leading trade partner with non-oil bilateral trade reaching Dh296 billion ($81 billion) in 2023, a 4.2 per cent increase from 2022, according to official data.

The new joint venture will help build deeper economic, trade and cultural exchanges between China and the UAE, said China Eastern Airlines chairman Wang Zhiqing.

“This year marks the 40th anniversary of diplomatic relations between China and the UAE. Both countries continue to develop and strengthen the … collaboration on the Belt and Road Initiative,” he said.

The deal also comes as Etihad continues to grow its network.

This month, it will start flights to Bali and Jaipur, as well as seasonal destinations such as the Greek islands of Mykonos and Santorini, and the holiday resorts of Malaga in Spain and Antalya in Turkey, the airline said last week.

Etihad's operating fleet grew to 89 aircraft in the first quarter, from 75 the previous year, including the addition of three new Boeing 787s in February.

Its capacity in terms of available seat kilometres increased by 35 per cent annually in the first quarter.

The airline posted an after-tax profit of Dh526 million for the first three months, up from Dh59 million in the same period a year ago, as total revenue rose about 21 per cent annually to Dh5.7 billion.

The alliance with China Eastern will result in expanded travel options for passengers travelling between major cities such as Shanghai, Beijing, Xi’an and Kunming, and key cities in the UAE and across the Middle East and Africa regions, Etihad said on Wednesday.

The airline currently operates 10 flights a week to China at present – five a week to Shanghai and five a week to Beijing.

In the long term, the plan is to have 28 to 42 flights a week from Abu Dhabi to China.

“It’s a great deal because China is a market that we believe is going to grow … we want to be a major player in China and instead of doing that by ourselves, we partner and do it much better,” Mr Neves said.

The challenge, however, is execution.

“It’s much easier to discuss than to implement and we have a lot of governance issues that need to be addressed and a lot of communication,” Mr Neves said.