Etihad Regional a bold step forward in aircraft code shares

After making orders worth $67bn at the Dubai Airshow, another exciting development for the Abu Dhabi airline.

Etihad Airways confirmed aircraft and engine orders worth US$67 billion at the recent Dubai Airshow. It was a massive vote of confidence, not just in Boeing and Airbus, but in the long-term prospects for air travel.

Another investment that day also signalled confidence in the future. This one was for just a tiny fraction of the value of the aircraft deals – but we believe it could open up a new era of competitive choice for air travellers all around the world.

The deal was our investment in Darwin Airline, which becomes the seventh member of Etihad Airways’ equity alliance.

But the real significance was in our launch, together with Darwin, of a new branded operation, Etihad Regional.

For the first time, we’ve gone a step beyond code shares, in which the booking systems recognise our partners’ flights as part of the Etihad Airways network, and vice versa.

With Etihad Regional, travellers will board an Etihad-branded aircraft and experience an Etihad-branded service as they connect through to our main European routes and also to those of our other equity partners.

The aircraft are still owned by Darwin Airline, the flights are operated by them and the staff are all Darwin employees. The aircraft will still carry a Darwin Airline logo, operate under the Darwin code and will still proudly bear the Swiss flag.

But together, we are developing and offering a new service which will allow the Etihad brand to touch many, many more cities in Europe – particularly secondary cities which may never support direct flights from Abu Dhabi.

At a stroke, we are opening up competitive choice to tens of millions more European consumers. They will now have the choice of flying with Darwin Airline to connect on to flights to our Abu Dhabi hub and beyond – all the while under the Etihad badge of quality.

It’s not just good for consumers. Darwin Airline receives new investment and gains access to a grouping of airlines that can feed it increasing numbers of passengers. It is no exaggeration to say that Maurizio Merlo, Darwin’s chief executive, sees the deal as the biggest opportunity in the 10-year history of the airline.

The significance goes beyond Darwin Airline and the secondary cities it serves. This could be a model for a new era in global airline competition.

The problem with air travel is that globally, it is highly regulated. That means airlines are limited by government-to-government agreements on where they can fly to, how many flights they can operate, even how many passengers they can carry. Some nations aim to encourage greater competition by having very liberal approaches to who can fly in and out of their markets – the UAE being an honourable example. But in many cases, airlines from outside a particular country or region face limitations in how they can operate within that country or region.

That’s why, unlike almost every other industry, there have been very few mergers and acquisitions in the airline sector.

Status quos are there to be challenged, however, and that’s just what Etihad Airways’ strategy is doing.

We have no interest in owning or controlling other airlines. We simply want to build the best global air network and be able to offer our customers connectivity across the world, routing through our strategically located hub in Abu Dhabi.

Which is where our strategy of minority airline investments comes in; and it is where the evolution of that strategy into regional, badged operations comes in.

Etihad Regional is a brand that can be rolled out almost anywhere in the world, with many different partners. It can extend consumer choice in markets that would not support – or perhaps even allow – direct flights by Etihad Airways; markets in which the choice would otherwise only be disjointed, expensive flight-by-flight connections through separate airline networks.

It is also a brand that is truly collaborative. It works only through partnership with the operating airline – in this case, Darwin Airline. We have to have a shared vision and a shared direction – as they are in control, as majority owners of the business. We have to work well together.

I’m excited by Darwin Airline and by our shared launch of Etihad Regional which, of course, is subject to all necessary regulatory approvals. European air travellers should be too. I hope in future, travellers from around the world get the chance to see the Etihad Regional brand. It will mean we are delivering more competitive choice to more markets.

There are many European and American workers who will be pleased with Etihad Airways’ commitment of more than $67bn spending with aerospace suppliers last week. There should be many, many more Europeans – and other international travellers – who are pleased with the opportunity for greater choice in their long-haul travel plans.

James Hogan is president and chief executive of Etihad Airways