Are Etihad And Lufthansa Really Considering A Merger?! Here’s An Update

As I posted about earlier today, an Italian newspaper was reporting that Etihad was in talks with Lufthansa over the possibility of buying a stake in them. It was even suggested that the two airlines may enter a full-blown merger, which I was skeptical about.

The relationship between Etihad and Lufthansa is a new one, and is due to their mutual connection to airberlin — Etihad owns a big stake in struggling airberlin, and Lufthansa is essentially saving airberlin by taking over many of their planes, as a way of keeping other ultra low cost carriers out of Germany.

Despite Lufthansa’s previous vocal opposition to Etihad, the two airlines have extended their relationship beyond their connection to airberlin, and are now codesharing.

So while I could see Etihad buying a stake in Lufthansa (similar to how Qatar has bought a stake in British Airways), a merger of any sort seemed unlikely to me.

Etihad-A340-600

Well, Reuters is now reporting on an update to the situation, which denies the possibility of a merger and/or financial stake:

“A financial stake is out of the question at the moment,” one source, who is familiar with Lufthansa’s plans, said. A source familiar with state-owned Etihad also said Abu Dhabi would not want to pay for a stake in Lufthansa.

The first source said Lufthansa was talking to Etihad, but about more codesharing and catering cooperation.

There have also been media reports that Italian shareholders in Alitalia are keen for Lufthansa to invest in the Italian carrier, which is working on a fresh turnaround plan, along with speculation that Lufthansa could take on more of Air Berlin.

Now, on one hand it’s perfectly normal for representatives of an airline to deny talks until everything is set in stone. At the same time, the above isn’t an official statement, but rather information funneled through unnamed sources.

As usual, I suspect the truth lies somewhere in the middle here. Expanded cooperation between Etihad and Lufthansa could make a lot of sense. Lufthansa has been fighting the Gulf carriers for a long time, though now seems to be making the best of the situation. Etihad and Lufthansa are starting a gradual codeshare agreement, though I could see value in this being expanded.

For example, Lufthansa could codeshare with Etihad on routes to Australia, Southeast Asia, the Middle East, etc., while Etihad could codeshare with Lufthansa on routes to the Americas and secondary markets in Europe.

While I believe there might not be immediate plans for Etihad to buy a stake in Lufthansa, I wouldn’t be surprised to see Etihad buy a small stake in Lufthansa eventually, and for that to grow over time, as we’ve seen with Qatar Airways and British Airways.

Lufthansa-747

Bottom line

As expected, a full-blown merger seems out of the question. If I had to guess, I think we’ll see expanded cooperation between Etihad and Lufthansa, and eventually might even see some financial stakes.

It’s interesting to see the changing dynamic between the Gulf carriers and other traditional network carriers. If only the U.S. airlines would finally catch on…

Comments

  1. Singapore with no natural resources but a strategic location runs a world class airline staffed mostly with Singaporeans.

    Abu Dhabi with so much oil wealth can’t run a decent airline staffed mostly with foreigners.

  2. A financial investment is not going to solve Lufthansa’s primary issues – high labor costs and competition from low cost airlines. Meanwhile, Etihad doesn’t have the answers – it can’t run it’s own airline very profitably but thinks it can buy stakes and turn airlines around. But then when you are desperate …

  3. Of course Alitalia are keen on Lufthansa investment as they are desperate and almost out of cash which is not a first time. However I doubt of any investment from any other airline in Alitalia. Etihad had a strategy, as an outsider to reinforce their presence into Europe faster gaining terrain into their most direct rival Emirates which I consider difficult to reach any time soon.

  4. I want to clear some of your misconceptions.

    1) Etihad and Emirates are the only gulf carriers turning a profit.

    2) Kuwait airlines, Gulfair, Saudia, Qatar, Royal Jordanian, Middle eastern airlines are all losing money.

    3) I frequently fly Etihad business class on many routes and have never seen an empty seat in F, J or Y for that matter.

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