New agreement between Etihad and Lufthansa

Etihad Airways and Lufthansa finalized a codeshare agreement, set to begin this month (subject to government approval). The agreement signals a strategic cooperation between two former, and often bitter, rivals. Although initially restricted to the carriers’ passenger operations, the deal may foreshadow future cargo developments. The German carrier will begin putting its LH code on Etihad Airways’ twice-daily flights between Abu Dhabi and Frankfurt and its twice-daily services between Abu Dhabi and Munich. Etihad will, in turn, put its EY code on Lufthansa’s services between Frankfurt and Rio de Janeiro, Brazil as well as Bogotá, Colombia. Lufthansa also agreed to lease 38 aircraft from Air Berlin, in which Etihad holds a 29% stake. The aircraft will fly for Lufthansa’s Eurowings Group and its network carrier Austrian Airlines.

While the two deals are unrelated, they were both announced on the same day and could be indicative of tightening relations between the two carriers. Struggling to grow its cargo business, Lufthansa Cargo has already finalized, or is in the process of forming, new cargo joint ventures with Japan-based ANA, US-based United and Hong Kong-based Cathay Pacific. Given that Qatar Airways has already chosen IAG as its European partner, a cargo alliance between Lufthansa and Etihad seems even more likely.

In other Etihad Airways news, the carrier is showing some signs of a slowdown in its cargo division. Despite having recently clocked its busiest month ever this past October, when it carried 53,785 tonnes, year-over-year cargo volume growth has slowed to low-single-digit percentages. Etihad’s passenger business is also showing signs of trouble, and the carrier confirmed that layoffs (reportedly starting at the very top, with CEO James Hogan) would be part of a restructuring plan that will help Etihad adapt to “an increasingly competitive landscape.”