Reshuffling the Decks: Can code-shares bring détente to Gulf and Europe?

Strategic shifts
Etihad embarked on a strategy of operational partnership with a number of carriers, however it was their equity investments that “really put some skin in the game,” Kerr said. The two arrangements – operating partnership and equity investment – allowed Etihad to operate as a “virtual airline,” with capacity sold by other partners or minority stake airlines. That strategy has allowed Etihad to grow its cargo business platform in a way that extends the network’s choices. Freight booked on Alitalia, for example, could just as easily move in Etihad belly holds or freighters.

Qatar Airways pursued a similar strategy with its 15.67 percent minority investment in IAG, which had abandoned freighters in 2014. But one month after Qatar upped its stake, IAG Cargo was selling capacity aboard Qatar Cargo freighters. “Our freighter partnership model with Qatar Airways has worked very well,” said Steve Gunning, CEO of IAG Cargo at the time. “We are able to support our customers where they need us and drive network growth in an asset-light way.”

Etihad’s commercial partnership with Avianca is the most significant partnership outside of the minority-stake group, according to Kerr. The two carriers cooperate on southbound and northbound operations from Italy into South America. This relationship allows the two airlines to increase capacity and provide a one-stop-shop for airway bills, reporting, back-office support, customer service and – on the front line – to reap the benefits of Etihad’s global sales team.

The cargo side of the Lufthansa-Etihad deal is in a similar vein; an effort to leverage a platform that Etihad has built up over the better part of the last decade. “That brings benefits to our partner carriers, and our equity carriers, and we look beyond that for partnership at all times,” Kerr explained. Now he is focusing on the deal at hand. “We’ll obviously consider what opportunities there are on the cargo side. There’s no template that we’re seeking to impose or follow.”

With every new development, the notion of “strange bedfellows,” loses credence in favor of an understanding that deals such as the Lufthansa-Etihad agreement can reveal untapped synergies. Neither carrier can afford to pass up potential cargo or passengers, and the competition of the last decade has left European carriers with no choice but to assess partnerships based on competitive route structures, rather than on geography.

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