Announced today, Abu Dhabi based Etihad Airways has inked a deal to set up its own low-cost carrier. In partnership with the Sharjah based budget carrier Air Arabia, Etihad’s new low-cost airline is seen as a vital element of Etihad’s turnaround plan.
A new LCC for the UAE
Etihad and Air Arabia will enter a joint venture partnership to establish a new low-cost airline based out of the UAE capital. The new airline will be named Air Arabia Abu Dhabi. Reports suggest that the airline will be independent in terms of business strategy, but will be controlled by a board of directors nominated by the partners.
The two airlines released a joint statement announcing the partnership, in which Etihad CEO Tony Douglas commented,
“This exciting partnership supports our transformation programme and will offer our guests a new option for low-cost travel to and from Abu Dhabi, supplementing our own services. We look forward to the launch of the new airline in due course.”
The new airline will be the fifth in the UAE, and the first low-cost carrier in Abu Dhabi. Although Air Arabia has bases in many other locations including Egypt and Morocco, this new airline will be a newly created entity and not just another hub for the low-cost carrier.
The other four airlines in the UAE are full-service Emirates and Etihad alongside hybrid flydubai and low-cost Air Arabia.
Is there room in the market?
There has long been speculation that the aviation marketplace in the UAE is somewhat overcrowded. With a population of around 10 million, Emirates and Etihad have largely survived on their ability to provide a hub connection between markets in Europe and Asia.
However, things have not been going so well for Etihad of late. The carrier posted a third consecutive year of losses, racking up a deficit of almost $5bn in the process. Its flawed strategy of investing in failing airlines has not paid off, and this will be the first step into a new joint venture since it began pulling back from its investments.
Despite being in the throes of a major turnaround strategy to put the airline back in the black, its CEO seems confident this is a step in the right direction.
“With the emirate’s diverse attractions and hospitality offerings, travel and tourism play a vital role in the economic growth of the capital and the UAE. By partnering with Air Arabia and launching Abu Dhabi’s first low-cost carrier, we are serving this long-term vision,” Douglas confidently asserted.
Perhaps the move was in response to rival Emirates developing closer ties to hybrid airline flydubai, which started operating on Emirates routes last year. Certainly this new carrier will be some competition for the Dubai based carrier.
Profitable by 2023
Under the leadership of Tony Douglas since 2018, Etihad has embarked on an extensive turnaround plan, stepping away from some of its investments and focusing on being a good mid-sized airline instead. Rather than striving to become as big as Emirates, Etihad is now playing to its strengths and working on being comfortable in its own skin.
With the five year turnaround plan well underway, Etihad’s Chief Operating Officer, Robin Kamark confidently pronounced that the airline would be profitable by 2023. How this new low cost venture fits into that plan is unclear; in so many other cases this sort of strategy has not worked out.
Still, for travelers in the UAE and beyond, a fresh, low cost offering will be welcomed, as will the inevitable drop in fares it will bring.