Etihad’s Backdoor Access To Europe Slammed Shut As Germany Axes Air Berlin Codeshares

It is a strategy that has won James Hogan, the chief executive of Etihad Airways, plaudits from the across the airline industry.

Shackled by restrictive traffic-rights agreements, Abu Dhabi’s Etihad has in recent years gone on a shopping spree across Europe. Equity stakes in Alitalia (49%), Air Serbia (49%), Switzerland’s Darwin Airline (33%) and Germany’s Air Berlin (29%) have allowed the Gulf carrier to pursue backdoor expansion across the continent, swapping traffic with local partners and restructuring their networks to feed Abu Dhabi.

The investment model has narrowed the gap between Etihad and its two older, larger Gulf rivals – Dubai’s Emirates Airline and Qatar Airways – contributing an estimated $1.1 billion to the newcomer’s top line in 2014.

All three of these so-called Gulf super-connectors are growing their businesses off the back of intercontinental transfer traffic – poaching market share from European hubs that were long considered the default stopovers on East-to-West journeys. Relentless double-digit growth by Emirates has allowed Dubai to overtake London Heathrow Airport as the world’s busiest international hub.

But the Gulf’s gain could be Europe’s loss, and German authorities are now pulling down the shutters on one of Etihad’s most cherished investments: Air Berlin, the perennially loss-making (but operationally mature) German carrier.

In December, the Administrative Court of Braunschweig upheld a decision by Germany’s Transport Ministry to revoke 29 codeshare agreements between Etihad and Air Berlin. Those accords, which allow Etihad to book passengers onto Air Berlin-operated flights, will expire on January 15th (notwithstanding ongoing legal action by both carriers). Their loss will nearly halve the number of services that Air Berlin operates in conjunction with Etihad, significantly curbing the potential for traffic swapping at its Berlin and Dusseldorf hubs.

The bone of contention between Germany and Abu Dhabi is the ambiguously-worded bilateral air services agreement that both governments have signed.

Under the terms of the agreement, Etihad is permitted to fly from to four destinations in Germany with its own metal, while also placing its code on three other services. Two of those existing codeshare entitlements – Abu Dhabi-Berlin and Abu Dhabi-Stuttgart, both operated by Air Berlin – have now been revoked, purportedly because they are not explicitly named in the bilateral treaty. The remainder of the canceled codeshares are connecting services over Germany; lucrative intra-European flights that the partners use to synergistically grow revenues.

In December, the Administrative Court of Braunschweig upheld a decision by Germany’s Transport Ministry to revoke 29 codeshare agreements between Etihad and Air Berlin. Those accords, which allow Etihad to book passengers onto Air Berlin-operated flights, will expire on January 15th (notwithstanding ongoing legal action by both carriers). Their loss will nearly halve the number of services that Air Berlin operates in conjunction with Etihad, significantly curbing the potential for traffic swapping at its Berlin and Dusseldorf hubs.

The bone of contention between Germany and Abu Dhabi is the ambiguously-worded bilateral air services agreement that both governments have signed.

Under the terms of the agreement, Etihad is permitted to fly from to four destinations in Germany with its own metal, while also placing its code on three other services. Two of those existing codeshare entitlements – Abu Dhabi-Berlin and Abu Dhabi-Stuttgart, both operated by Air Berlin – have now been revoked, purportedly because they are not explicitly named in the bilateral treaty. The remainder of the canceled codeshares are connecting services over Germany; lucrative intra-European flights that the partners use to synergistically grow revenues.

Originally found on Forbes.Com

americans4fairskies2015Etihad’s Backdoor Access To Europe Slammed Shut As Germany Axes Air Berlin Codeshares