Etihad's Australia service booms

Virgin Australia started flying directly between Sydney and Abu Dhabi in February. AFP

Bookings to Australia for Etihad Airways have increased fourfold this year as a result of its new strategic partnership with Virgin Australia.

The two airlines are linking up Etihad's global network with Virgin Australia's more than 40 flights across Australia and New Zealand, part of Etihad's strategy to broaden its reach by partnering global carriers.

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The burgeoning relationship marks a dramatic contrast to Etihad's previous partnership with Qantas, which it viewed as an unsatisfactory arrangement for the interests of the Abu Dhabi carrier. Etihad ended the accord last year to pursue a partnership with Virgin Australia.

"We are actually quadrupling the results we had with Qantas," said James Hogan, the chief executive of Etihad. "It has worked very well and it is just early days - we haven't cranked up." Etihad carried 450,000 passengers in and out of Australia last year. The tie-up with Virgin Australia, which is moving from a budget airline into a full-service competitor to Qantas for the business-travel market, means the Abu Dhabi airline can now offer more reach into Australia than Emirates Airline or Singapore Airlines, Mr Hogan said.

As part of the deal, Virgin Australia started flying directly between Sydney and Abu Dhabi in February and is expected to expand this by flying to the UAE capital from Brisbane next year.

The two airlines are also planning to jointly build and operate a business-class lounge in Sydney, and already share costs by partnering on aircraft maintenance and joint sales and marketing efforts. Another major piece of the partnership is allowing Virgin Australia customers to earn and redeem frequent flyers' benefits on Etihad flights, and vice versa.

Code-share deals are a central plank for Etihad, which is often grouped together with Emirates and Qatar Airways as one of the big three long-haul Gulf airlines.

"If you look at the fleet network growth of those two airlines, we are not going to be anywhere near that," Mr Hogan said. "We always talk about the right shape and size, and we believe a strong code-share strategy is good for our customer."

Etihad has 31 code-share agreements with foreign carriers and is in talks to add TAP of Portugal to its list of partners.Partners include Czech Airlines, which announced it would operate services into Abu Dhabi after sealing a code-share pact with Etihad. With demand for travel between the UAE capital and Prague limited, the code-share will allow Czech Airlines to carry passengers to Abu Dhabi who will then fly Etihad to points in South East Asia or the wider Middle East

The pact was similar to the one Etihad signed with Ukraine International Airlines, which also operates flights to the UAE capital. "We have no intention to fly to Czech or Ukraine so to have them operating here and synchronising with us is a win-win," Mr Hogan said.

Elsewhere, the Abu Dhabi airline is going after big-spending high-fliers by upgrading its loyalty awards programme with a new category, Gold Elite. The expanded features of the Etihad Guest programme are designed to help the airline snag lucrative premium-class travellers as it builds up its Abu Dhabi base to serve long-haul passengers between Asia and Europe.

The carrier said the new category would add layers of service for customers and also hinted it would be unveiling further benefits for customers by the end of the year. This includes passengers being able to redeem their guest miles at any retail point of sale worldwide, in lieu of currency.

"We have spent considerable time listening to our most frequent passengers," said Peter Baumgartner, the chief commercial officer of Etihad. "We believe the offering to Gold Elite members is unsurpassed."

The new status will be added to existing categories of basic, silver and gold status for members with more than 125,000 miles collected through air travel, or those who have taken 30 return flights over a 12-month period. Such programmes are popular tools for airlines to build customer loyalty, gather important customer information and create a more direct dialogue between airline and customer.

Etihad's strategy has included partnering airlines such as American Airlines and Virgin Australia to integrate the respective loyalty programmes and give customers the ability to earn and redeem miles on these foreign carriers.

Etihad Guest was launched in August 2006 and now has almost 1.2 million members, after growing by 32 per cent in the past year. About 400 members will automatically be upgraded to Gold Elite status.