30-Sep-2010 11:11 AM

Etihad sees strength in Virgin Blue alliance; Qantas approached first

Etihad Airways CEO James Hogan stated Etihad's alliance with Virgin Blue, which was tentatively approved by the Australian Competition and Consumer Commission (ACCC) last week, meant the carrier was joining a global network that "was much stronger than Qantas" (Gulf News, 30-Sep-2010). Mr Hogan's comments were made in response to Qantas CEO Alan Joyce stating it had been approached before Virgin Blue regarding the agreement but had rejected the alliance with Etihad because "the numbers didn't stack up" and the carrier did not see any economic benefits of such a deal (ABC/AAP, 29-Sep-2010). Qantas has attempted to block the proposed agreement between Etihad and Virgin Blue citing concerns over pricing on the Abu Dhabi-Australia route. Qantas, in its ACCC response, stated: "Since Abu Dhabi attracts only a small volume of point-to-point travel, the true value of the proposed alliance rests in access to international networks. It is not possible that the applicants will not also be coordinating prices between Australia and Europe when they are price fixing on the Australia-Abu Dhabi route." Mr Joyce has subsequently stated the carrier objected to the alliance because "the airlines were not being put through the same process that Qantas and British Airways once had to endure".

Qantas: "We had the opportunity of flying into Abu Dhabi. [Etihad was] very keen for a closer relationship. When we decided that we weren't going down that path, that's when they made a decision to actually approach Virgin ... Etihad is losing a lot of money, Qatar is losing a lot of money. So any extra capacity in there is always going to be a struggle and we were very comfortable with our partners," Alan Joyce, CEO. Source: AAP, 29-Sep-2010.

Qantas: "In terms of our deal with Etihad, we saw that deal as limited because we have our own operation into London and we've got a great relationship with British Airways ... The economics of it did not stand up for us and we very much looked at our relationship with British Airways and our relationship with Air France, which is the way we service the European markets, as being very key to us ... We objected to the [Virgin Blue-Etihad] process they were going through, not to the deal itself, because the process for us, it is not the same process Qantas had to go through," Alan Joyce, CEO. ABC, 29-Sep-2010.

Etihad Airways: "Etihad is a private company and does not publish its financial results. I was not aware that Alan had been through our books, but if he had, he would know that Etihad is on track to achieve its financial targets. In relation to our proposed alliance with Virgin Blue, the numbers not only stack up, they are compelling ... Our codeshare arrangement with Qantas – ironically negotiated with [Virgin Blue CEO] John Borghetti during his time there – was an important part of Etihad's past. Virgin Blue, however, is our future. We are very excited to be working with an airline that recognises not only the benefits of flying into the Middle East and beyond, but the value to Australia's travellers and Australian tourism of a modern global network, a network that is much stronger than Qantas'," James Hogan, CEO. Source: Gulf News, 30-Sep-2010.

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