Etihad turns its attention to Virgin Australia

March 05, 2012 by Victor

Virgin is one of Etihad's 35 partner airlines

Etihad First Class Cabin

Virgin is one of Etihad's 35 partner airlines, but Mr Hogan has made clear a wish to go beyond ticketing and loyalty program integration to take an ownership stake in the Australian carrier, re-born in the past 18 months as a premium airline under the guidance of his old airline industry mate John Borghetti.

He thinks Virgin's new business offering fits well with the premium, flat-bed business class of Etihad.

"We've been able to totally integrate our services with Virgin, we're fully transferable to all destinations on all services," he said.

"If the opportunity is there, we'd be very keen to take a piece of Virgin Australia."

Etihad has shown it is willing to take major stakes in rival operators that offer a shared approach by becoming the largest shareholder with a 29 per cent share in partner Air Berlin.

Mr Hogan is due in town this week to celebrate the airline's fifth anniversary in Australia, during which he has grown its total passenger numbers from 2.7 million to 8.3 million yearly.

Mr Hogan, who grew up in Essendon, seems certain this week to meet Mr Borghetti, another northern suburbs boy, and you can bet that they'll be setting aside their Bombers-Blues AFL rivalry to talk teamwork.

Etihad loomed in the background as Mr Borghetti outlined a new management structure for the airline, with the aim of sidestepping regulations limiting foreign ownership to 49 per cent.

Etihad has reportedly already spoken to Sir Richard Branson about selling some of his 26 per cent share in Virgin.

Etihad's $13 million profit was modest, but was a vindication for Mr Hogan against the cynics who claimed the government-backed operation would fail.

"We've opened up a whole range of other markets and we're different to a European trans-Atlantic carrier and even Qantas because our network is much broader. When problems in the world do hit we can move capacity from Europe, we can move it into India, the Middle East, China, South East Asia, and Australian traffic has been very strong for us."

The Middle East airline's location, within six hours flying time of most of the world's population, is its central strength and highlights the natural disadvantage of an end-of-route carrier like Qantas.

Major new routes are opening up beyond traditional carriers, such as business out of China, flying across the Gulf and into Africa.

The airline also has an undoubted head start on its established rivals, as no company in Abu Dhabi pays corporate tax, and its deep pockets mean most of its aircraft are just over three years old.

Another cost contrast is labor relations, with Etihad as a near-new carrier not having the same issues with entrenched work practices which saw Qantas fly into such financial strife last year.

"We're not bound by old rules which have no relevance today," Mr Hogan said.

Having the airline 80 per cent hedged on fuel has paid off handsomely.


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