Etihad-Virgin Blue alliance approved

Etihad Airways has been given the green light to commence its strategic alliance with the Virgin Blue Group of Australia later this month.

Etihad Airways and the Virgin Blue Group have been given the green light to code-share. Andrew Henderson / The National

Abu Dhabi is set to become an international hub for air travellers from Down Under.

Australian authorities have formally approved Etihad Airways' alliance plans with the Virgin Blue Group, removing the final obstacle for the two airlines to commence their code-sharing partnership this month.

The decision by the Australian Competition and Consumer Commission (ACCC) will lead to the Virgin Blue subsidiary V Australia launching non-stop flights to Abu Dhabi on February 24 and using the UAE capital as an "international hub", said John Borghetti, Virgin Blue's chief executive and managing director.

The go-ahead from the ACCC will also allow Etihad to sell tickets on V Australia flights to and from Abu Dhabi as well as on dozens of Virgin Blue flights within Australia, and in New Zealand and the Pacific Islands. "This is just the beginning. We hope to expand the partnership over time, providing greater benefits to travellers by growing competition and opening new routes," said James Hogan, the chief executive of Etihad.

The co-operation between Etihad and Virgin Blue is intended to capture a larger share of the leisure and corporate traffic between Australasia and Europe, and to put the two companies on a stronger footing against rivals.Emirates and Etihad are among Gulf airlines that are rapidly expanding their fleets and taking a larger slice of the global aviation market.

Last year, Middle Eastern carriers reported the strongest full-year growth worldwide, with demand for seats increasing 17.8 per cent, compared with a 13.2 per cent capacity increase, according to the International Air Transport Association (IATA). The capacity increase in Middle Eastern airlines was fuelled largely by aircraft deliveries to Gulf carriers, causing a "structural shift" in the industry, IATA said.

Etihad and Virgin Blue together fly to more than 100 destinations, including 45 that Virgin Blue serves across Australia, New Zealand and the Pacific islands.

The deal is Etihad's most comprehensive and strategic alliance to date, and a key feature is the ability of both airlines' customers to earn and redeem frequent-flyer miles on either carrier. "This will allow us to offer corporate and leisure travellers a very attractive one-stop service to more than 14 destinations in Europe, as well as the United Kingdom, the Middle East and Africa," Mr Borghetti said.

When V Australia begins operating three weekly flights from Sydney to Abu Dhabi this month, it will give the two airlines a combined frequency of 27 weekly flights between Abu Dhabi and Australia.

That includes a twice-daily service between Abu Dhabi and Sydney, a daily service between Abu Dhabi and Melbourne, and six flights per week between Abu Dhabi and Brisbane. A year later, V Australia is scheduled to add three flights per week between Brisbane and Abu Dhabi via Singapore.

Etihad had previously signed a code-sharing deal with Qantas but ended that relationship to develop ties with Virgin Blue.

The Centre for Asia Pacific Aviation (CAPA), an aviation research organisation in Australia, said the alliance would give both carriers an instant boost. "The essentially domestic operations of Virgin Blue Group and the long-haul international services of Etihad are to be linked, delivering Virgin Blue an extensive virtual network and providing Etihad with extensive behind-gateway domestic access," CAPA said.

"In the process, both carriers will not only have extended networks, but they will also be in a much improved position to attack the corporate market, over which Virgin Blue's large competitor, Qantas, predominates."