The Dubai Air Show kicked off this week and the most interesting story isn’t the one getting all the attention. The headlines are mostly about the 777X and Boeing taking in huge order commitments for the type. That’s all well and good, I suppose, but the news out of Switzerland and Abu Dhabi is, to me, much more interesting. Etihad is launching a new brand, Etihad Regional, based in Zurich. The new operation is being spawned from Darwin Airlines, a small operator based in Lugano, Switzerland. The UAE-based carrier is taking an ownership stake (subject to regulatory approval) and altering the operation in a big way.
Currently Darwin flies primarily domestic and regional routes from Lugano and Geneva. With Etihad’s ownership stake the operation is expected to expand rapidly, adding 21 new routes and 18 new destinations to the 21 current destinations by mid-2014. The new routes will include connectivity to the Air Berlin network at Dusseldorf and Berlin and to the Air Serbia network at Belgrade; both Air Berlin and Air Serbia are carriers where Etihad also has an equity stake. They will also include a number of new flights via Zurich, providing connectivity to a new Etihad route expected to launch serving Abu Dhabi–Zurich starting in June 2014, subject to government approval.
#Etihad Regional will allow our guests improved connectivity in regional towns and cities in #Europe. #DubaiAirshow pic.twitter.com/YUAuNC1NDA
— Etihad Airways (@etihad) November 17, 2013
Etihad’s approach to the European market has been different from the other Gulf carriers. It is building partnerships and connectivity through a series of strategic equity investments – Darwin will be the fourth European airline in which they hold equity – rather than either bilateral partnerships (e.g. Emirates/easyJet) or formal alliances (Qatar Airways/oneworld). It is obviously too early to judge which of the approaches is right versus wrong but the equity approach taken by Etihad gives them much more of a say in how the relationships will develop over time.
And then there’s the part where Etihad is now using its own brand for flights within the region. This may actually be the most significant part of the deal. Feeding passengers across the various partner carriers is useful for building loads and helping connectivity but it falls short on the marketing front. By pushing the Etihad brand forward within Europe the new operation changes things dramatically. This is not just a codeshare or frequent flyer reciprocity; it is a major step forward in the way the Etihad brand is marketed, both within Europe and further afield.
For now there is just one member of the Etihad Regional family, with fewer than 40 destinations and a small fleet of turboprop aircraft. With feed from major airline partners at multiple international gateways it is easy to see the potential for significant additional growth, either through the same Darwin Airlines operation or via other partners Etihad may buy in to going forward.
- Etihad continues to add partners, facilitate connections
- Etihad buys in to the Indian market, takes stake in Jet Airways
- Etihad invades Germany, buys controlling interest of airberlin
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Interesting. I guess something like this happening in the U.S. isn’t likely anytime soon – aren’t there restrictions on foreign airlines operating domestically? Or maybe there wouldn’t be interest in it from international carriers anyway?
Yes, there are foreign ownership restrictions in the USA, but there are in Europe, too. Etihad owns a small piece (49% in Air Serbia is the largest; 33.3% in Darwin, less in AB/EI) but has also convinced the other shareholders to buy in to the plan. That’s key. There are also many, many more regional operators in Europe than in the USA thanks in part to the many former flag carriers so getting one to partner with is a bit easier.
And also the US regulators (on behalf of the US-based carriers) would almost certainly not let this happen.
Very interesting. I have a client in Lugano, so travel there a couple times a year. Many of them prefer to fly out of MXP, but I wonder if this might change that…
It will likely depend on where they’re going. Milan is still going to offer a lot more non-stop options and I doubt that Lugano is really going to grow too much out of the deal. But there will be many more one-stop options regionally via GVA/ZRH as other destinations and routes are added. That could make the hour drive down less attractive.
1) Alitalia is failing…and with the news this week of no additional capital coming from Air France-KLM , I wonder if Etihad is looking into buying into Alitalia. Then I could see this new regional service taking hold between Italian cities and Swiss, German, and Serbian cities served by Air Berlin, Darwin, & Air Serbia.
2) I wonder what SWISS is thinking right now ?!
1) I cannot imagine that anyone wants anywhere near Alitalia with their current debt load and employee contracts. That’s just bad news all over the place. I’d say just expand Darwin if that’s really what you need/want. Then again, remember the short-lived experiment which was Lufthansa Italia.
2) Darn good question.
Lugano’s airport is a very scary airport if you don’t close your eyes. You should consider it only as a feeder to bring passengers to a hub. Once that is established it is easy to imagine that Italian passengers would be better served by flying something like LH to FRA and further connections.
If Alitalia were to fail I imagine LH would be the immediate beneficiary. LX or OS might have been contenders but they now follow LH orders. The Italians have grudging respect for German efficiency.
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