Etihad Airways Case Study

Argument:
That the rapid expansion strategy of Etihad Airways through equity purchase in other airlines is a sound strategy.

Introduction

From the New York to New Dehli, Etihad Airways has expanded its network by forming its own airline group through buying stakes in other carriers. The “Etihad Airways Partners” presently include Airberlin, Niki, Aer Lingus, Air Serbia, Air Seychelles, Darwin Air (renamed Etihad Regional), Alitalia, Jet Airways and Virgin Australia.

Etihad Airways, the youngest of the three Gulf carriers (Emirates and Qatar airways being the others), has pursued a different strategy to its two larger peers, acquiring stakes in airlines and using code-sharing partnerships — in which companies sell seats on each other’s

Today, Etihad offers over 350 destinations across six continents. This is huge growth for an airline that’s only 12 years old.

Much more than traditional alliances, the Etihad Partners network allows for greater flexibility in flights. Schedules can be re-worked to allow better connection times between airlines and greater convenience to passengers.

It’s not just greater connectivity and additional revenues, however. The economies of scale created across the partnership are also gaining relevance. Moves are being made to unify fuel management across the airlines with Honeywell Aviaso being selected as the vendor. This move along with several other system upgrades provides much better economies of scale when purchasing on behalf of all partners.

Partners also have the advantage of a large fleet pool. Airlines within the group have been able to lease aircraft from each other in order to maximise utilisation and open new routes. This type of resourcing also works for people. While restructuring is taking place in airlines such as Alitalia and Air Berlin with the need to reduce staff numbers, Etihad itself is in a period of natural growth, requiring more cabin crew and

To be able to share this product with its partners will give Etihad a potential advantage in attracting customers, particularly given the importance of the virtual network.

Conclusion

The rapid expansion of the group’s network and access to newer and larger markets is a benefit to all parties. Through the Etihad Partners, Etihad Airways continues to accomplish its own success while boosting the business of the other airline partners with mutually-beneficial alliances, some of which may not have been able to survive without Etihad’s intervention, or would have been relegated to a more marginal status if involved with another investor.
Despite the recent trouble regarding regulatory authorities in both Europe and the US the strategy is moving full steam ahead unabated.
Strong organic growth by Etihad is aided by extensive commercial partnerships, strengthening the carrier’s hub through a lower capital investment approach. On the other hand, the airline achieves strong efficiencies through equity partnerships, allowing it to act as a much larger entity on the world