Etihad and Lufthansa signal closer ties after $100m catering deal

From left, James Hogan, the chief executive of Etihad Aviation Group, Mohamed Al Mazrouei, the Etihad chairman and Lufthansa’s Carsten Spohr. Jeffrey E Biteng / The National

Etihad Aviation Group and Lufthansa signalled the potential for increased collaboration after the airlines struck a US$100 million catering deal yesterday.

James Hogan, Etihad ­Aviation Group’s outgoing president and chief executive, yesterday described the collaboration ­agreements with Germany’s Lufthansa as “the first step of developing further opportunities” between the two groups.

The agreement is for a four-year deal for Etihad to use catering services supplied by Lufthansa’s LSG Sky Chefs, as well as an initial agreement to use maintenance, repair and outsourcing (MRO) services provided by Lufthansa Technik.

Mr Hogan said that the deal, which was the culmination of eight months of negotiations, had been borne out of earlier agreements, such as the wet lease of 38 aircraft from Etihad Aviation Group’s airberlin to Lufthansa’s Eurowings airline signed last year and a code-share agreement on flights between Germany and Abu Dhabi, which came into force yesterday.

“When we first announced our code-share with Lufthansa, many people were surprised. After all, we’ve been tough competitors for many years,” Mr Hogan said.

“It quickly became clear as we entered discussions that we could build this partnership in a way that complements our airberlin relationship”, with the two groups now exploring cooperation in other areas including freight operations, procurement and passenger services.

The agreements were signed before Mohamed Al Mazrouei, Etihad Aviation Group’s chairman, at an event held at Emirates Palace.

Carsten Spohr, Lufthansa’s group chairman and chief executive, said it was “an honour to have Etihad as a new partner”.

He said that the code-share agreement on flights between Frankfurt, Munich and Abu Dhabi initially, with Rio de Janeiro and Bogota set to follow, will “offer greater travelling opportunities to both of our customers”.

“We at Lufthansa are also looking forward to turn these code-shares into real, seamless terminal experiences for our joint customers as of today,” he said.

Etihad will also relocate its operations in Frankfurt and at Mun­ich into Lufthansa’s dedicated terminals.

Mr Spohr said the four-year deal with Lufthansa’s LSG Sky Chefs would make it Etihad’s biggest provider of catering services outside Abu Dhabi. He said the agreement for MRO services with Lufthansa Technik could be worth more to Lufthansa than the $100m catering agreement, but “that would depend on numerous contracts which are in the final phase of negotiation”.

LSG Sky Chefs is the world’s biggest in-flight caterer, with a presence at 200 airports in 50 countries.

Erdmann Rauer, the chief executive of LSG Group, said that the catering deal was “a revenue and also profit-driven agreement, but it’s also very much a content partnership … So it’s similar to engineering in terms of designing new products, driving ancillary sales and bringing new features into the programme, like halal food.”

It covers 16 locations in Europe, Asia and the Americas.

Mr Rauer said: “We’re going to grow by other stations but also by frequencies. So if they’re putting additional flights to current destinations like Manchester, for instance, it will grow further.”

Will Horton, a senior analyst at the Centre for Aviation research consultancy, said that the significance of the latest deal was not the actual agreement signed, “but that this places Etihad and Lufthansa [in a position] to further cooperate and be more bold”.

He said further negotiations about a closer partnership were not likely to happen overnight.

“Etihad may be ready for a big partnership but Lufthansa’s way of business is cautious and gradual. Lufthansa’s management is always challenged when it moves faster than its powerful unions,” he said.

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