Etihad Aviation Group and Lufthansa German Airlines announced on Wednesday a new commercial partnership that includes a four-year $100 million (Dh367 million) catering agreement and another deal on maintenance, repair, and overhaul.
The deals mark the beginning of more partnerships between both airlines, with a joint venture possibly being the next step. The two airlines are also looking into boosting cooperation in sectors like freight operations, procurement, and passenger services.
"We see this as a first step of developing further opportunities. Both our senior teams met this morning to discuss further ways in which we can develop and strengthen our partnership over time," said James Hogan, Etihad Aviation Group President and Chief Executive Officer.
He added that Germany was "a critical market" for Etihad, and is one of the airline's largest outbound markets.
As part of the new partnership, the four-year catering deal will see Lufthansa's LSG Sky Chefs provide catering services to Etihad Airways in 16 cities in Europe, Asia, and the Americas. This will make LSG the largest provider of catering services to Etihad outside the latter's base in Abu Dhabi.
Etihad also signed a memorandum of understanding with Lufthansa Technik to explore cooperation in maintenance, repair, and overhaul services across Etihad and its equity partners. The deal will look into creating synergies with Etihad Airways Engineering.
Last year, Etihad and Lufthansa started working together, and have since announced a code-share agreement that covers four routes. The code-share will give Lufthansa increased access to markets across India via Abu Dhabi, and will give Etihad greater access to South American via Germany.
Speaking at a press conference in Abu Dhabi, Hogan, who last week announced he would step down from his position in the second half of this year, said Etihad was looking beyond just code-shares for partnership deals.
He remained firm on his stance regarding Etihad's partnership strategy after the airline was unable to halt losses at two of the carriers it acquired stakes in; Air Berlin and Alitalia. He said Etihad had "a great track record with our own partnership in achieving network reach."
"Our partnership strategy, which delivers 5.5 million passengers a year over our network, is a critical element of that strategy as shown in today's partnership announcement. The group board and our shareholders, the government of Abu Dhabi, support this strategy. We will, however, continue to refine and fine tune the strategy to react market conditions and challenges as we have always done," Hogan said.
Speaking to reporters afterwards, he described 2016 as a tough year, but did not disclose any details on the airline's performance. Hogan, however, said that key performance indicators "were certainly achieved."
He said Etihad will still have to mitigate challenges in 2017 and manage its costs "very tightly."
Also discussing outlook for 2017, Carsten Spohr, chairman and chief executive officer of Lufthansa Group, said he expected to see rationalisation in the GCC's aviation sector.
"I'm convinced — as somebody who has been in this industry for many years — that we will see a phase of more consolidation in Europe in the years to come. I'm also convinced that we will see a phase of more rationalisation in this part of the world, in the Gulf, to come. I think this industry needs to see a healthier relationship between offer and demand, and I'm optimistic we will see this in the years to come," he said.
By Sarah Diaa
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