Last year there was a report that Emirates and Etihad were considering merging. Then in the fall Emirates CEO Tim Clark said he was open to working with Etihad, and offered a non-denial denial about a likely merger. Now there’s a new modest agreement the two airlines have entered into — signed by their CEOs.
Energy prices are down, meaning that travel to the Gulf region is down. At the same time, there’s less of an appetite to absorb losses.
Emirates hasn’t been losing money but profits are down. Etihad has been hemorrhaging largely from investments in basket case airlines air berlin and Alitalia that they walked away from. The CEO who was the architect of this strategy was let go. Seat capacity out of Abu Dhabi is down about 10% year-over-year.
Meanwhile the region is now also starting to see increased competition from ultra low cost carriers. Emirates is adapting by working more closely with government-owned flyDubai.
Now Emirates and Etihad have entered into an agreement to share security information and for Emirates to provide training programs to Etihad. And it was handled directly by the CEOs of the two airlines.
Monday’s memorandum of understanding involves Emirates unit Emirates Group Security and Etihad parent Etihad Aviation Group working “together on operational areas both within and outside the UAE,” according to an Emirates statement.
The agreement was signed by Emirates President Tim Clark and Etihad’s new Group Chief Executive Tony Douglas.
While speculation of a merger has been a parlor game dating back a decade, it’s not clear that it makes any sense for any airline to operate major hubs a mere hour’s drive away from each other. Bringing the two airlines together would almost certainly mean a de-emphasizing of Abu Dhabi.
Indeed it was the de-emphasizing of Gulf Air’s Abu Dhabi hub in the first place that led the Al Nahyans to start their own airline in the first place.
Yet Dubai’s new Al Maktoum International Airport is even closer to Abu Dhabi and could make a single hub more palatable.
In the fall the CEO of Emirates said “there is value to be had working more closely with” Etihad. But ultimately it’s not a call that the CEOs of the two airlines will make, it’s up to the ruling families of Dubai and Abu Dhabi.