Etihad tie-up with Virgin hailed

Analysts cheered the tie up between Virgin Blue Group and Etihad.

The V Australia flight from Sydney was the first Australian service into the Middle East for two decades.

The strategic tie-up between Etihad Airways and Australia's Virgin Blue Group is being hailed by analysts as a near seamless fit and a boost for the Abu Dhabi airline in one of its most important countries for traffic.

The alliance includes V Australia, the long-haul arm of Virgin Blue, which on Thursday flew its Boeing 777-300ER wide-bodied airliner into the UAE capital, marking the first Australian service into the Middle East for two decades.

"When United Airline and Continental of the US were talking about merging it was said this was a marriage made in heaven, with few overlaps and total complementarity," said Peter Harbison, the executive chairman of the Centre for Asia Pacific Aviation, an aviation analyst. "There are similarities with Etihad and Virgin Blue."

The Etihad deal allows both airlines to use the other to feed traffic into their network. Etihad passengers can now book journeys to their final destinations across Australia, New Zealand or the Pacific Islands on Virgin Blue flights via the Etihad website.

Virgin Blue customers will also be able to take advantage of Etihad's global network and book journeys on one ticket to points in the UK, Europe and the Middle East.

"Both carriers will see this as a way to strengthen and build a position which they might not otherwise do alone," said John Strickland, the director of JLS Consulting in the UK.

John Borghetti, the chief executive of Virgin Blue, said buying its own planes to fly these routes would have cost it about US$10 billion (Dh36.7bn). "Had we gone out and decided to fly those routes on our own with an equivalent amount of capacity [to the joint venture] we would have had to buy, depending on the aircraft size, between 30 and 50 aircraft," he said.

The deal will also help Virgin Blue appeal to business travellers, a market it is trying to enter as it repositions from a budget airline aimed at leisure traffic into a full-service carrier to rival Qantas.

The tie-up between the Abu Dhabi airline and Virgin Blue, which was first brokered in August, caused a chain reaction within the industry: Etihad ended its code-share deal with Qantas while Emirates Airline ended a similar arrangement with Virgin Blue.

Etihad had initially planned a similar far-reaching deal with Qantas. It was Mr Borghetti, while he was a senior executive at Qantas in 2008, who negotiated the deal with Etihad's chief executive, James Hogan. But soon after, Qantas restructured its business plan and cancelled plans to fly into Abu Dhabi.

When Mr Borghetti left Qantas last year to head up Virgin Blue, he and Mr Hogan resurrected the plans. "I spoke with John Borghetti, after he'd been at Virgin Blue for a month, and I asked 'do you want to do that deal we did at the other place?' And he said 'yes,' so we met the next weekend in Singapore."

A month later, the two airlines announced their strategic alliance.

Etihad has lent its marketing muscle to promote the tie-up, which should help the Abu Dhabi carrier raise the number of travellers it flies in and out of Australia this year by 100,000, taking the total to 550,000. The deal comes at a crucial time when the seven-year old Etihad is pushing to reach its break-even financial mark.

Helicopters trailing huge banners of Etihad and V Australia buzzed overhead in Sydney on Wednesday. Later that evening, the Australian singer and actress Dannii Minogue was the emcee as Etihad hosted several hundred guests at a reception celebrating the launch of the airline partnership.