For several months, Etihad has been in discussions with the main shareholders of Alitalia with a view to acquiring a significant stake in the company, which would make it possible to establish its sustainability over time.
In all likelihood, Etihad could own 49.9% of the capital, thus taking operational control of Alitalia. The company will however have to retain a majority of community shareholders to keep its status as a European company.
Also, this rapprochement will undoubtedly have short, medium and long-term consequences for travellers, which are not always positive.
In the short term: more codeshare flights
The first consequence of such a rapprochement is, certainly, an increase in code-share flights. Alitalia and Etihad have a clear interest in doing so.
- Etihad, first of all, because the Italian air market is still under development. Italy is a territory with a very scattered and long population, a territory which makes the breakthrough of the high-speed train more complex than in France or Germany for example. Also, the supply flights marketed by Etihad will allow the latter to directly address a much larger population base. Etihad will nevertheless have to pay particular attention to checking the quality of service on Alitalia flights, a quality of service that sometimes leaves something to be desired and could alter Etihad’s brand image.
- Alitalia, then, because, following the restructuring partly carried out with the Air France-KLM teams, its medium and long-haul network has been reduced to a minimum, by concentrating on the most profitable routes. Alitalia therefore has every interest in developing these code shares to extend its network and offer more connection opportunities, in particular via Abu Dhabi to South East Asia, Australia or Africa.
For the traveler, it is the possibility of buying an end-to-end ticket: checking in their baggage interline (from origin to destination), benefiting from the advantages of the respective loyalty programs on these code-share flights.
In the medium term: A rapprochement or merger of the loyalty programs of the two companies
If the merger of the loyalty programs of the two companies seems unlikely in view of recent history (Emirates and Qantas / Etihad and Air Berlin or Air Serbia), a merger of the loyalty programs is largely possible:
- earning and using miles on all AZ and EY flights, with or without codeshare,
- reciprocity of the advantages of high-contribution passengers on both companies,
- alignment of earning/use of miles scales,
- harmonization of the number of “Elite” levels.
In the long term: Towards a redefinition of alliances?
The future of such rapprochements, in the long term, is rather uncertain. If they save some companies in financial disarray, they significantly modify the current balance of the aeronautical industry.
Currently, the companies are mainly grouped within 3 alliances that are fairly homogeneous in size and geographical distribution of the network: Star Alliance, SkyTeam and OneWorld. The other companies are either small or concentrated on geographical niches, with the exception of the 3 Gulf companies, Emirates, Etihad and Qatar Airways. But the situation has already started to change…
Scenario 1: Integrating Etihad into an alliance
This scenario is currently the favorite. Qatar Airways has, in fact, recently joined the OneWorld alliance.
This integration shows a real awareness of the major major companies: instead of waging a war in the field of communication with these new companies, why not ally with them and benefit from their network or even more. .
But if Etihad were to enter into an alliance, what would it be?
When Etihad took a stake in the capital of Air Berlin, it was naturally to OneWorld that all eyes turned. But Etihad’s interest in Alitalia and, above all, in a cooperation with Air France – KLM, a much larger company, means that SkyTeam is now holding the rope for a possible integration.
Scenario 2: An alliance centered around Etihad
This scenario is unlikely, of course, but still possible. Etihad has recently taken numerous stakes in European companies of various sizes and networks, such as Air Berlin, Air Serbia (formerly JAT Airways) and Darwin Airlines.
A massive stake in Alitalia could create a sufficient number of companies to create a first alliance of companies, which could be joined by Air France and KLM, for example.
Scenario 3: Towards a total explosion of the current airline alliance system
Although seeming improbable, this scenario is nevertheless more realistic than the previous one.
- First, the European majors have recently merged or taken massive stakes in other European companies. This is the case of Lufthansa with Swiss, Brussels Airlines or Luxair. This is the case of British Airways with Iberia or BMI. These companies now become groups now have a significant power making them less dependent on alliances.
- Secondly, joint venture agreements aimed at sharing revenues have multiplied on the transatlantic and transpacific routes, and there are even plans for JVs on the China-Europe routes. These agreements go much further than alliances: the companies must agree on the contribution of each and the distribution of the turnover.
- Finally, massive penknife blows in marriage contracts within alliances really put them in difficult positions. Recent examples are the discontinuation of Share Delta codes on Korean, or those of Turkish Airlines on Lufthansa… Markets on which the companies of the same alliance are in direct competition.
Conclusion
This merger between Etihad and Alitalia will have major consequences, for the traveler of course, but also on the structure of the passenger air transport industry. We will surely know much more in the coming weeks.
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