Etihad CEO Sees One or Two More Equity Investments

Etihad Airways, the Middle East’s third-largest carrier, said it will probably halt further equity investments after a couple more deals, most likely targeting Asian traffic.

Etihad, which has minority stakes in Air Berlin Plc (AB1), Virgin Australia Holdings Ltd. (VAH), Aer Lingus Group Plc (AERL) and Air Seychelles Ltd., must not get distracted running other carriers, Chief Executive Officer James Hogan said yesterday in an interview.

“There isn’t a shopping list,” he said. “Maybe there are one or two more deals we’ll do here, but what I can’t do is something that bogs my management team down. We don’t control those airlines, so we have to be convinced of their strategy.”

Hogan has taken stakes in smaller operators in key markets while building up Etihad’s own network in a push to turn Abu Dhabi into a hub for inter-continental travel. The airline is “continually looking” for long-term investment prospects and bringing them before the board, with India and China currently the “key regions of focus,” he said in London.

Indian Options

Still, Etihad will avoid the path taken by Swissair, which “drowned” after buying up a dozen carriers, he said.

“I’m not stepping in to just help someone out,” the executive said. “I’m stepping where it will improve my top-line and bottom-line and improve theirs too. What is important is we all make money.”

Etihad is in due diligence with a “couple” of Indian airlines, Hogan said, while adding when questioned on whether a deal was likely: “Ask me in a couple of weeks.”

Jet Airways (India) Ltd. is in talks to sell a stake to Etihad as India’s largest listed carrier seeks funds following the lifting of a ban on airlines selling stakes to overseas operators, a government official said Nov. 26.

The disposal of a 24 percent holding may raise 16 billion rupees ($290 million), an official added on Dec. 3.

Hogan said that Etihad isn’t deterred by the possibility of government interference -- something that could “destroy the market,” according to comments in April from Willie Walsh, CEO of British Airways parent International Consolidated Airlines Group SA. (IAG)

Aer Lingus Stake

“We work in that part of the world and Willie doesn’t,” he said. “That’s our back yard. We wouldn’t enter into anything unless the governance was there in the shareholder agreement.”

Etihad will review its 2.99 percent holding in Aer Lingus after European Union regulators complete their review of a June takeover bid by Irish rival Ryanair Holdings Plc (RYA), Hogan said. The European Commission issued formal objections to the deal in November, setting out possible competition concerns.

“Once the commission has made its final ruling we will re- evaluate our position with regards to shareholding,” he said. “Ireland is a strong outbound market even in these tough times.”

There’s no question of Etihad taking a stake in Air France- KLM Group (AF), the biggest European carrier, with which it has agreed to code-share, though a cost-and-revenue-sharing-alliance that might include Italy’s Alitalia SpA, in which the Paris- based company has a stake, “is on the agenda,” Hogan said.

Alliance-Averse

“A relationship with Air France-KLM, Alitalia, combined with Air Berlin and Aer Lingus, that’s pretty powerful coming over the Gulf down to southeast Asia and Australasia,” he said.

At the same time Etihad is not looking at joining Air France’s SkyTeam global alliance, preferring to focus on code- share deals, equity holdings and organic growth, spurred by orders for more than 100 Airbus SAS and Boeing Co. (BA) aircraft for delivery over the next eight years, Hogan said.

The carrier currently has 41 code-share accords -- more than larger Gulf rivals Qatar Airways Ltd. and Emirates -- including recent additions Air France, KLM, Alitalia, PT Garuda Indonesia and Nasair of Saudi Arabia.

“At this point in time I have no interest in going into an alliance,” he said. “I don’t want to be told who I can work with and who I can’t. I’d rather work with CEOs of other airlines and focus on bi-lateral wins.”

Qatar Air, once the world’s second-biggest airline outside a global alliance, was won for the British Airways-led Oneworld group in October. A month earlier, Emirates of Dubai, the No. 1 Middle Eastern carrier, concluded a tie-up with Qantas Airways Ltd. of Australia, which terminated a 17-year BA accord.

Deutsche Lufthansa AG (LHA) is meanwhile in the early stages of discussions about closer ties to Turkish Airlines, as Turk Hava Yollari (THYAO) AS is known, though that’s as much through expediency as planned, Hogan said.

“I think Lufthansa is the odd man out, if you consider Emirates are with Qantas and Qatar is in Oneworld,” he said, adding that the German carrier is “stretching out” to Turkish Air because “they’ve missed the boat.”

To contact the reporters on this story: Kari Lundgren in London at klundgren2@bloomberg.net; Andrea Rothman in London via aerothman@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net

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