19-Dec-2011 6:14 PM

Etihad Airways to become largest shareholder in airberlin

Etihad Airways has agreed (19-Dec-2011) to increase its stake in airberlin, Europe’s sixth largest airline, to 29.21%, becoming airberlin’s largest single shareholder. Etihad Airways CEO James Hogan said the deal was one of the most important in Etihad Airways’ history. The carriers noted together they handle a combined total of more than 40 million passengers p/a, operate 233 aircraft and employ 18,000 people. Together, the companies generate more than USD9 billion in revenues. The two airlines estimated that each airline could achieve incremental revenues of between EUR35 million and EUR40 million in 2012, and "believe the partnership has enormous potential to unlock a range of efficiencies”. Details include:

  • Ownership stake: Etihad Airways’ minority stake will consist of 27.03% from a new share issue (31.57 million new shares) by airberlin, funded from operational cash flow, and an existing interest of 2.99% (pre-dilution), which will amount to a total interest of 29.21%. The new shares will be issued at a price of EUR2.31;
  • Debt financing: Etihad has undertaken to arrange for a debt financing in favour of the airberling group in a total amount of up to USD255 million with a term until 31-Dec-2016;
  • Air Berlin Middle East operations: airberlin will shift its Middle East operation from Dubai to Abu Dhabi. The carrier will operate four A330-200 weekly services between Berlin and Abu Dhabi from 15-Jan-2012. European travellers will have immediate access to a total of 29 weekly services to and through Abu Dhabi from four German hubs, with a plan to increase to 42 services from mid Apr-2012. airberlin stated the Abu Dhabi will become the carrier's new gateway to Asia and Australia. airberlin will drop services to Bangkok and offer instead codeshare services with Etihad;
  • Codeshares: The airlines will implement an extensive codeshare agreement, with Etihad Airways codesharing on 36 of airberlin’s 171 destinations and airberlin codesharing on 24 of Etihad Airways’ 82 passenger destinations, and plan further expansion of the pool of codeshare routes. Etihad Airways will also sign codeshare agreements with the airberlin group for all European activities including NIKI and Belair. This will bring to 269 the total number of destinations Etihad serves, either directly or with partner airlines;
  • FFP: Etihad Guest and topbonus, the airlines’ frequent flyer programmes (FFP), will be integrated with FFP reciprocity;
  • Air Berlin Board: Under the agreement, Air Berlin's board of directors will be expanded by three non-executive directors to a total number of 17 directors. Two non-executive directors will be appointed upon nomination by Etihad. Etihad CEO James Hogan will be appointed vice-chairman of Air Berlin's board of directors.;
  • Anti-trust immunity: The two companies will seek anti-trust immunity, which would allow greater coordination of route networks and of sales and marketing activities;
  • Joint procurement: airberlin and Etihad Airways are committed to creating a joint procurement taskforce to look for cost efficiencies across the two companies, including areas such as fleet procurement and deployment, maintenance, repair and overhaul (MRO) and general procurement;
  • Alliance plans: Air Berlin stated it continues to plan joining the oneworld alliance by spring 2012;
  • Approvals: The closing of the transaction is subject to market-standard conditions precedent, in particular approval by the German Federal Cartel Office (Bundeskartellamt). The closing of the transaction is planned for 1Q2012. [more - original PR] [more - original PR - Air Berlin] [more - original PR - Etihad Airways] [more - CAPA Analysis]

airberlin: “The strategic partnership with Etihad Airways opens up enormous opportunities for the future of our company. This applies especially to future market development and the realization of synergies. One of the key components of the new partnership is the launch of airberlin services to Abu Dhabi, which will become our new gateway to Asia and Australia. The agreement with Etihad Airways will also dramatically improve the global connectivity of our customers in Germany, Switzerland, Austria, and throughout the GCC and Middle East,” Hartmut Mehdorn, CEO. Source: Company statement, 19-Dec-2011.

Etihad Airways: “This new partnership expands our network reach, gives us access to 33 million new passengers, and provides us with a real opportunity for global growth. Through airberlin, we gain immediate access to a broad and complementary European market, with outstanding connectivity options for customers of both airlines. Our partnership strategy has been integral to our success over the past eight years, and the returns we have seen from this strategy have confirmed its value. We are always looking for ways to grow and partnerships are a smart way to enhance our ability to compete on the world stage. We now have a portfolio of 34 quality airline partners, but this is our first equity investment in another airline. It is a sign of our confidence in airberlin’s management and in the carrier’s potential to grow with us. We expect such growth will also offer a host of additional employment opportunities, both in Europe and the United Arab Emirates,” James Hogan, CEO. Source: Company statement, 19-Dec-2011.

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