Etihad takes stake in Virgin Australia

The UAE national carrier confirmed that the stake has been built over recent weeks, through purchases on the open market.

In a statement Etihad said it "believes that this equity investment in Virgin Australia’s domestic operations significantly strengthens the 10-year strategic partnership forged by the two carriers in August 2010 and will enrich the commercial benefits which the alliance already provides for both airlines as well as increasing the benefits to Australian consumers and visitors to Australia."

The airline has recently taken equity in Air Berlin, Air Seychelles and Aer Lingus.

Together, Etihad Airways (21) and V Australia (3) operate 24 flights a week between Abu Dhabi and Australia and passengers have access to a combined network of more than 150 destinations. Last month Etihad Airways leased a Virgin Australia Boeing 777-300ER for use on its route between Abu Dhabi and Kuala Lumpur.

Etihad Airways began flying to Australia in March, 2007 when it launched services to Sydney. Melbourne and Brisbane were quickly added. Nearly 2.2 million passengers have been carried between Abu Dhabi and these three cities in the last five years.

Industry analyst Saj Ahmad said: " Etihads ongoing policy of buying up strategic stakes in partners means that it can now tap into Virgin Australia's domestic market and capture more traffic than if it relied on its own services to the country. It also puts Qantas on notice that Etihad is not just competing with them on an international scale but now they have the capability to expand on their Virgin Australia partnership and compete with them in their own back yard.

"Qantas is still battling to reinvent itself and there is no way that they will have seen this development. While Etihad continues its organic expansion, the recent deal with Virgin Australia to operate one of the 777-300ERs alongside their existing pact only strengthens both airlines resolve against Qantas and its low cost arm, Jetstar. It's also likely that Etihad will try to grow this stake in Virgin Australia as well as deepen their existing codeshare agreement on key routes such as Sydney, Melbourne and Brisbane."