Etihad to up the ante with greater stake in Virgin Australia

Etihad acquired a 4.99 per cent stake in the Australian airline earlier this year, and had applied to the Foreign Investment Review Board (FIRB) to raise the level of its investment.

Together, Etihad Airways and Virgin Australia currently operate 24 flights per week between Australia and Abu Dhabi offering Australian travellers and visitors to Australia greater choice and access to a combined network of more than 285 global destinations

The purchase followed the a highly successful multi-tiered partnership between the two airlines that included code-sharing on flights, joint marketing initiatives and reciprocal earn-and-burn on their respective frequent flier programs.

In a statement the Abu Dhabi airline said that the strategic partnership had already delivered significant revenues to each airline. “It is expected that the equity stake in Virgin Australia will lead to further revenue generating opportunities,” it said.

Analyst Saj Ahmad said: ”Etihad’s strategy of buying up stakes in partners is yielding it both commercial and revenue success. The initial stake in Virgin Australia was always going to increase given the depth of their partnership and its possible that Etihad would like to lift this beyond the 10% they have outlined already.

“Not only does this allow Etihad to grow its Australian presence, but it gives the carrier a greater share of customers and revenue going forward as the carrier aims to reach profitability again this year.

“This move will of course raise eyebrows at an ailing Qantas, already failing in its attempts to compete with Qatar Airways and Emirates - and with Etihad upping the ante right on Qantas' turf and looking to poach customers from its lucrative domestic market, Etihad has carved another masterstroke of putting its rivals on alert with no clear direction for them to respond in kind.

“Virgin Australia and Etihad are a great natural fit and their partnership looks set to strengthen even more.”

The first Etihad Airways flights from Sydney to Abu Dhabi took place in March 2007 and since then it has started flights from Brisbane and Melbourne, with plans for services from Perth in future.

In total, nearly two million passengers have flown with Etihad Airways between Australia and its Abu Dhabi hub.

Etihad Airways has three regional offices and a line maintenance facility in Australia, and now employs more than 300 Australian members of staff who are based in Australia, Abu Dhabi and at stations around the world.

It is estimated that Etihad Airways' passengers have spent more than AUD$ 1.5 billion locally on hotels, tours, restaurants, retail shopping and other tourist activities in Australia.

The airline's aircraft, office, marketing and selling costs have directly contributed more than AUD$ 540 million to Australia’s GDP.

Etihad has also invested strongly in the local community, becoming a trusted sponsor to Australian sporting and cultural sectors, not least through its long-term commitment to Etihad Stadium in Melbourne.