Photographer: Martin Leissl/Bloomberg

Lufthansa, Etihad to Explore Deeper Links After Code-Share Deal

  • German carrier was once critical of rival Gulf carriers
  • Cooperation is a by-product of lease deal with Etihad partner

Deutsche Lufthansa AG and Etihad Airways PJSC of Abu Dhabi agreed to share seat sales in the first step of what could be deeper cooperation between the former adversaries.

The two airlines will initially code-share on Etihad’s twice-daily flights linking Abu Dhabi with Frankfurt and Munich, and the German carrier’s services connecting Frankfurt with Rio de Janeiro and Bogota, according to a joint statement on Friday. The deal is a by-product of a cut-rate lease for 38 planes with the Persian Gulf carrier’s ailing partner Air Berlin Plc.

The agreement offers Etihad another bridgehead in Europe, where it has struggled to make partnerships with Air Berlin and Alitalia work. For Lufthansa, it’s the first linkup with any of the Gulf carriers, which Chief Executive Officer Carsten Spohr had criticized as competing unfairly. Those disputes appear to be in the past as overcapacity in the European aviation market depresses fares just as oil prices threaten to increase costs.

“We have long seen Germany as a key strategic market, and this new relationship with Lufthansa marks the next step,” Etihad Group Chief Executive Officer James Hogan said in the statement. “It is very clear to us that Lufthansa is a like-minded, forward-thinking organization with which we can do strong, meaningful and mutually beneficial business.” Spohr said Lufthansa and Etihad are considering cooperation in additional areas.

Replacement Planes

The seat-sale accord expands on the deal to use planes operated by Air Berlin, which is all but controlled by Etihad. Lufthansa’s Eurowings low-cost arm will lease 33 Airbus Group SE A320-series aircraft from Air Berlin, while its Austrian Airlines division will take another five, the companies said Friday. Air Berlin is also providing crew for the aircraft as it cuts its core fleet in half.

Air Berlin said in September that the lease agreement with Lufthansa will generate proceeds in excess of 1.2 billion euros ($1.25 billion) over the six-year contract term that starts in February. The companies dropped plans for two aircraft-only leases from the originally announced deal, Tobias Spaeing, an Air Berlin spokesman, said Friday.

Eurowings said it got the so-called wet-lease at a “competitive rate.” The budget carrier will use some of the fleet to replace as many as 20 older aircraft, reducing some overcapacity in the market.