Breaking: Etihad & Lufthansa considering Merger?

The world of aviation can be strange. We have seen numerous occasions of the unlikeliest of suitors lining up. For instance, American Airlines and US Airways. Qatar Airways picking up a minority stake in British Airways.

Now, it seems there will be full-blown play of this story on a bigger level. Reuters is reporting:

Germany’s Lufthansa and Etihad Airways are in talks to possibly merge the two airlines, Italian daily Il Messaggero said in an unsourced report on Tuesday.

According to the paper, managers from both companies have for weeks been examining the possibility of Etihad taking a 30-40 percent stake in Lufthansa via a capital increase reserved for the Abu Dhabi state-owned airline.

In a second step, the two airlines would look at a full-blown merger to create a carrier with 97 million passengers a year, the paper said. It added the parties would meet shortly to speed up the talks.

This blows my mind. Their neighbor Qatar Airways had sort of made small moves on British Airways’ IAG and acquired small stakes in the airline. However, Etihad is perhaps taking a bigger step here by starting with a 30-40 percent stake.

Etihad must already have lines open with Lufthansa, given the other airline in Germany, Air Berlin, is an Etihad airline, and they are currently turning over 38 planes and crew to Lufthansa.

Does this make sense?

Here is the play for Etihad as I can see it. Emirates already took the centre of the globe positioning and has enough planes to fly to every nook and cranny of the world. Etihad started with building a network of equity airlines alliances, and this seems to be the big piece of that puzzle, where they down a whole airline in Europe. With hubs in Germany and Abu Dhabi, the airline will have lines open for about 8-10 hour long flights to North America, Asia, Africa and Europe. Qatar already got a headstart on a similar strategy, aligning with oneworld partner airline British Airways.

For Lufthansa, they are crowded perhaps from both sides by Qatar Airways and British Airways + other IAG companies, and this looks like a step in the direction of gaining back the traffic they fear to lose to the expanded IAG/Qatar combine.

Bottomline

Wow. I am just amazed at the proposition itself, which would make a carrier with 97 million pax a year. Will Etihad be putting out the First Apartment on all the Lufthansa A380s as well? I don’t know. By association, Etihad will move to Star Alliance. Again I don’t know.

What do you think of this? Will this go through and Germany will let one of their crown jewels be exported to the Middle East?

Comments

  1. Is this breaking !

    LH & EY had been discussing over the wet-lease of AB for over 3 months and eventually giving AB to LH for a minority stake in LH (~12%).

    IMHO the odds of a full blown merger is off the table as its too complex especially wrt current position of EY with investments in AB, AZ and others burning their financial position.

    An extended code share (more than the current routes) or an easy ticket for EY to *A might happen.

  2. So you do not allow links to be placed here to help readers understand the actual facts of the “merger”??

    Cannot fathom the fact that my comment was not posted, Ajay!

  3. even if it happens, it ain’t happening anytime soon. And the big bureaucracy of lufthansa, the unions and the strikes? It’s impossible for the culture to align with a typical middle eastern airline which is ruthlessly anti-union. If it happens I’d be bearish.

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