Etihad Airways buys 3.96% stake in Virgin Australia
WAM Abu Dhabi, June 5th, 2012 (WAM) -- Etihad Airways announced that it has acquired a 3.96% stake in Virgin Australia Holdings.
The stake has been built over recent weeks, through purchases on the open market.
Etihad Airways 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.
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.
The Abu Dhabi-based carrier's purchase of a 3.96% stake in Virgin Australia represents the airline's fourth acquisition in six months.
Etihad said it bought the stake in the Australian carrier through purchases on the open market in recent weeks. No details were revealed about the price Etihad paid for the stake or whether it plans to increase the stake in the future.
"Etihad Airways 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," the carrier said in a statement.
Virgin Australia recently completed a restructure that freed it from Australian foreign ownership laws that limited offshore investment in the company to 49%.
The two airlines are already part of an alliance which features codesharing on each other's flights and reciprocal frequent flyer recognition. Etihad began flying to Australia in March, 2007 when it launched services to Sydney.
Eight-year old Etihad has also been actively seeking stakes in overseas carriers to help it compete with regional rivals Emirates and Qatar Airways.
In December, Etihad acquired a 30% stake in AirBerlin, followed by a 40% stake in Air Seychelles in February and a 3% in Aer Lingus announced more recently.
"Etihad's organic growth clearly isn't enough for them and their policy of buying up stakes in other carriers operating in key markets will have rattled yet more cages with this deal involving Virgin Australia," said Saj Ahmad, chief analyst at London-based StrategicAero research. "Given that the stake is relatively small, it won't be of that much concern to Qatar Airways and probably even less so for Emirates." Ahmad believes the deal could be a blow for Australian carrier Qantas. "The person who should be worried is Alan Joyce, CEO at Qantas. The deal specifically caters for Etihad to aim for the coveted domestic market in Australia, where Virgin Australia has, over the years, eaten away at Qantas' loyal customers. This will give Etihad effective access to any Australian city through deeper codeshares to boost its traffic figures and it's not clear whether Qantas ever factored such a move into its own decision making and planning. Qantas has been dithering as of late, losing money and passengers to its low cost arm Jetstar -they will be acutely aware that they are under threat if this partnership blossoms.
As it is, Qantas has no response to this and it would look rather foolish of them if they were to do a u-turn and try and coax Emirates into a deal that had been mooted once before, but it's highly unlikely Emirates will give Qantas the time of day or even care," he said.