European unease over Etihad stake in Air Berlin

Etihad Airways' acquisition of a bigger stake in Air Berlin is a signal of the growing shift in the balance of power from the old guard of European carriers to the new generation of airlines.

Air hostesses from Etihad Airways, left, and Air Berlin stand on the podium during a press conference in Berlin announcing the share sale. AFP

The acquisition by Etihad Airways of a bigger stake in Air Berlin is likely to stir tensions among European airlines concerned about the expansion of Gulf carriers into their home territory.

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The deal is being viewed by analysts as a signal of the growing shift in the balance of power from the old guard to the so-called new generation of airlines.

"Lufthansa sees the Gulf carriers as its biggest threat," said analysts at the Centre for Asia Pacific Aviation.

"To have the fastest-growing of them established in its capital city will shake more than the balance of power in Germany. For Etihad's move is surely just one step now in breaking down the sharp division between, on one side, the new-generation airlines and, on the other, the established European big three of Lufthansa, Air France-KLM and British Airways-Iberia."

It was announced on Monday that Etihad had agreed to pay US$95 million (Dh348.9m) to increase its stake in Europe's sixth-largest airline from 2.9 per cent to 29.2 per cent.

Under the arrangement, both airlines are seeking anti-trust immunity from regulators to coordinate flights, fares and marketing. It will also mean Etihad will be able expand its routes into Europe, including the key market of Berlin.

In the past five years, carriers such as Lufthansa, Air France and Austrian Airlines have been increasingly vocal in opposing the growth of the three largest Gulf airlines, which they contend are a threat.

Some have lobbied their governments to limit landing slots available to Gulf carriers. Emirates Airline had tried unsuccessfully for several years to gain access to Berlin.

Etihad's deal signals a new approach to expansion, a step that does not rely on seeking new slots.

It allows the airline access to a number of European cities and 33 million passengers.

The deal may also position Etihad closer to entering one of the big three global alliances: Oneworld, Star Alliance and SkyTeam, that account for three quarters of all airline passengers.

"The deal could eventually allow Etihad to ponder joining the Oneworld alliance of whom Air Berlin is a key member," said Saj Ahmad, the chief analyst at StrategicAero Research. "While there's no rush to do this, expanding Etihad's cooperation with an alliance member, and one whose foothold is in Europe, gives the UAE carrier greater access to other airlines who also interline with Air Berlin."

Lufthansa and Air France refused to comment on the Etihad deal.

No one was available to comment from British Airways.

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