The long-awaited day has finally arrived. After years of begging Air France/KLM to give it more money, Alitalia has finally shifted its glances in a different direction. The perennially-struggling airline has announced that Etihad will pour in a bunch of money and own just shy of half of Alitalia. You know that this means. By the rules of the transitive property of equality, Etihad is now the worst airline ever.
Maybe this, uh, isn’t completely mathematically accurate. After all, Etihad will “only” be buying 49 percent of Alitalia, and that’s only if Alitalia meets several conditions, including job cuts. But Etihad is building up quite a track record of pouring money into financially-beleaguered carriers and preventing failures that would improve the health of the industry, so this “worst airline” title isn’t entirely unearned in its own right.
We don’t know how much Etihad is paying, though it’s been quoted that the airline will be willing to spend over 1 billion euros for the privilege. That’s a lot of money to throw down a rabbit hole, but I guess it’s not a lot if you’re backed by the bottomless pit of wealth coming out of Abu Dhabi.
I wrote last year how Etihad was effectively trying to cobble together its own fourth global alliance by buying up stakes in airlines and then tightening their commercial arrangements. That alone isn’t a big deal, but the problem is, as mentioned, that Etihad is simply propping up failing airlines. Many of Etihad’s partners aren’t commercially viable and without a lifeline, they would have drowned. Just look through the portfolio to see what I mean.
Alitalia, the long time holder of the title of world airline ever, is just the latest example of this. Air Berlin has been on the ropes, hemorrhaging cash. Etihad helped that airline survive when it first invested, but Etihad recently had to put more into the kitty. And Etihad Regional (formerly Darwin Airline, of which Etihad now owns 33 percent) is meant to feed these European money-losers.
How about Jet Airways of India? It hasn’t made much money in years, and just posted record losses. Etihad is a recent investor there, but it’s already being discussed how much more the airline will have to pour in.
Virgin Australia is also losing money like crazy, and it probably has too much capacity in the market. Though if Virgin Australia cleans up its act, it should at least have a long term place in the industry.
At least Aer Lingus is making a little money. But then again, Etihad only owns a very tiny piece of that airline.
Oh, and let’s not forget Air Serbia. It’s hoping for a breakeven year, which would be an excellent result for an Etihad partner. But Air Serbia also pays Etihad to manage the airline, so even if Air Serbia only breaks even, Etihad still makes money. Good for Etihad, bad for the industry.
Lastly, there’s Air Seychelles. This airline has actually posted a profit for two years in a row. That may sound impressive, but it’s hard to know exactly how that number is being calculated. After all, its long haul “fleet” is two A330s wet-leased in from Etihad. I have to wonder if they’re paying market rates… anyone want to make a bet on that? This was an airline that had abandoned long haul flying completely before Etihad stepped in to revive it.
The result of Etihad’s work so far is that there are airlines that should either be smaller or shouldn’t exist at all. These carriers are limping along, but with the deep (and I mean DEEP) pockets of Etihad, they don’t have to worry about actually going out of business. Etihad might find this arrangement works well, but I’m sure that most other carriers in the industry who have to compete with these money-losing airlines are steaming.
Does that make Etihad the worst airline ever? Nah, Alitalia will still hold that title, especially if it can’t meet the conditions to actually get this funding from Etihad pushed through. But Etihad seems to be trying pretty hard.
