Emirates and Etihad buddy up for symbolic clout

Etihad

It could be coincidence, but the timing of the first interline agreement between the UAE’s two largest airlines seems pointed. 

The buddy-up between Dubai’s Emirates and Abu Dhabi’s Etihad announced on May 4 occurs just as Saudi Arabia serves up credible competition with its new national carrier.

The question is: will the UAE airlines’ agreement be anything more than symbolic?

Interline agreements – whereby one airline sold another airline’s flight for which they received a modest commission – were once a foundation stone of the industry.

The theory was that every airline benefited, both “giving and receiving” revenues from each other in a semi-competitive market. 

But then came larger airlines with greater ambitions, airline alliances and strategic partnerships.

This meant global carriers became increasingly selective about those with whom they interlined, preferring, where possible, to keep the revenue to themselves at all costs. 

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Timing matters

Not surprisingly, Emirates and Etihad, two ambitious players, never wanted to ‘give’ revenue to their fiercest competitors – until today. 

So why now, and what does the agreement mean?

The why is simple: increasing competition. The rising prospect of serious competition in Saudi Arabia, the wider Vision 2030 project, Neom and The Line, would make any two airlines draw their own line in the sand and start to rethink their relationship.

It is an early acknowledgement of the threat posed by Riyadh Air, Neom Airlines, the repositioning of Saudia, and the growth of low-cost carriers in the region. But will the tie-up make any substantive difference?

Looking at some of the critical metrics of the two airlines and, indeed, their respective partner airlines provides some interesting insights into their market positions.

In most cases, interline agreements are between airlines of broadly similar size and scale, but not here. Emirates has four times as many seats as Etihad and flies to twice as many destinations. It has an operating fleet three times larger than the Abu Dhabi-based airline, with twice as many aircraft on order.

And to add context, FlyDubai has a larger network and larger fleet order than Etihad, while Air Arabia Abu Dhabi is nowhere in the market.

So, it is hardly a meeting of equals! But of course, this development is not just about equals; it is more about national symbolism. 

The bigger picture

The context to the agreement is promoting UAE tourism to and letting passengers travel into one airport and depart from another. This allows travellers to spend time in both Dubai and Abu Dhabi.

Talk about access to two world-class brands may be true. But unless Emirates and Etihad are about to codeshare and sell each other’s cheapest seats, the agreement seems more of a publicity exercise than something that will benefit both parties commercially.

Unless, of course, this is the first step to a wider level of cooperation between the two carriers.

Could we see full codeshares, frequent flyer programmes merged and even shared resources such as fleets, engineering and purchasing? And perhaps, most sacredly, could we see both airlines merge to build a mega hub at Dubai World Central?

For now, the agreement provides a photo opportunity and some positive PR, and delivers a statement to other regional players.

But will the new agreement make an immediate difference to travellers and tourism growth to the UAE? Absolutely not!

John Grant is partner at UK consultancy Midas Aviation