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Thursday, July 3, 2014

Etihad Airways Seeks European Expansion

Woodrow Bellamy III 

[Aviation Today July 3, 2014] Etihad Airways CEO James Hogan is urging the European Union (EU) to embrace more investment from foreign businesses. The Middle Eastern airline's chief executive discussed the realities of the challenges that European carriers are facing during an EU conference on air transport competitiveness in Vienna.  

The European Commission (EC) does not allow foreign airlines to possess majority control of carriers based within the European Union. Etihad currently holds a 4.9 percent stake in Aer Lingus, 29.2 percent of AirBerlin and 49 percent of Air Serbia, but Hogan believes more partnership is necessary to restore economic vibrancy in the European commercial air transport sector. 
 
“Consolidation of airlines is critical to sustainable air services,” Hogan said. “External investment is not a threat. It is an opportunity to strengthen airlines, and to support employment and economic growth.”
 
While Etihad is coming off its strongest first quarter results ever with $1.4 billion in total revenues, the International Air Transport Association (IATA) is projecting European airlines will realize an average net profit margins of just 1.3 percent for 2014, or about $3.23 per passenger. 
 
Hogan's speech echoed comments made by IATA CEO Tony Tyler last month during a speech in Rome where he called for changes to the EU's "draconian" regulation of its aviation industry. The Etihad CEO sought to counter opponents of Gulf carriers' expansion into Europe, as several carriers, including Lufthansa and Air France KLM, believe that their expansion is cutting into competitiveness. 
 
“Etihad Airways is wholly-owned by the Government of Abu Dhabi. We received start-up capital, like every airline does, but we receive no state subsidies, no free fuel and no reduced airport charges in the United Arab Emirates," said Hogan. "“Gulf carriers are not the cause of Europe’s aviation challenges."
 
Hogan believes the biggest challenges facing the European air transport sector is airspace congestion resulting from under-investment in airports and Air Traffic Management (ATM). Other issues noted by the Gulf airline executive include high operating costs at traditional hub airports and inconsistent taxes imposed on airlines and passengers. 
 
Etihad has a "pro-competitive" expansion strategy, according to Hogan, who also is seeking to expand the airline's investment in the India commercial aviation market. Outside of the impact of Gulf carriers, Hogan also noted that the growth of low cost airlines in Europe is having a major impact on the larger legacy carriers in the region. In 2013, low cost airlines accounted for 43 percent of all European regional air traffic. 
 

“There are strong economic and social benefits from stable and connected airlines,”  Hogan said. “Etihad Airways wants to engage with Europe.” 

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