Will Emirates merge with Etihad Airways?

Emirates, the world’s largest international airline is looking at acquiring its unprofitable neighbor Etihad Airways, according to a Bloomberg report. The news agency is citing “four people familiar with the matter”, and say the merger talks are at a preliminary stage and would see Emirates acquire the main airline business of Abu Dhabi’s Etihad. Bloomberg said that while both airlines initially declined to comment, they both “later denied that any talks were underway.” Previously Emirates Chairman Sheikh Ahmed bin Saeed Al Maktoum and President Sir Tim Clark have played down speculation that the airlines might merge. In June Etihad announced that it had posted another massive loss amid reports it was talking to Boeing about deferring or canceling 777X orders. SEE: Interior images highlight increased comfort on the 777X The carrier said its core airline produced a loss of $US1.52 billion in 2017 as it faced significant fuel cost increases, the entry into administration of equity partners Alitalia and airberlin and investment in a restructuring program. The unaudited result came as passenger numbers rose slightly to 18.6 million and the load factor fell marginally to 78.5 percent. However, unit costs were down 7.3 percent, despite a $US337m rise in fuel costs, and administration and general expenses fell 14 percent compared to 2016. “We made good progress in improving the quality of our revenues, streamlining our cost base, improving our cash-flow and strengthening our balance sheet,’’ new group chief executive Tony Douglas said at the time. “These are solid first steps in an ongoing journey to transform this business into one that is positioned for financially sustainable growth over the long term. I would like to thank our people for their hard work and dedication in 2017. “It is crucial that we maintain this momentum, retaining talent and attracting leading professionals from around the world to work alongside our highly-skilled UAE national workforce,” said Mr. Douglas.

In contrast, Emirates more than doubled its profit to $US762 million in 2017-18 despite competitive pressures, political instability, and rising oil prices. It benefited from the weaker US dollar as well as the surge in the cargo industry as revenue rose 9 percent to $US25.2 billion. Passenger numbers rose 4 percent to a record 58.5 million as the airline filled more seats as it kept capacity growth tight at 2 percent compared to 2016-17. The passenger load factor rose 2.4 percentage points to 77.5 percent as passenger yield, a measure of average fares, increased 6.9 US cents per revenue passenger kilometer.