If you want to bring tourism and the incredible dollars that come with it to your country, a leading airline goes a long way. Emirates has brought Dubai into the top 10 most visited cities in the world, with millions of annual visitors and billions in visitor spending. But just an hour away, Etihad has attempted to follow suit. Abu Dhabi is a fast growing oasis of the UAE, offering some of the best art museums in the world – yet in recent years, the airline designed to drive traffic has faltered. As falter turned to stumble, which turned to billion dollar losses, rumors began to swirl of an Emirates – Etihad merger. Comments this week from Emirates chairman Sheikh Ahmed bin Saeed Al Maktoum seem to hint the long anticipated merger may be pure speculation, for now…
Investment in now defunct Airberlin, and perennial bankruptcy favorite Alitalia spurred damaging losses for Etihad. The airline hoped to funnel even more traffic via Abu Dhabi via these acquisitions, while gaining firm ground in Europe. Instead, the airline ate vast sums of money, with virtually zero return on investment. Meanwhile, the rise of low cost carriers, such as Norwegian began to cut into operations and lead to unfortunate cost cuts and route reductions. The airline now faces a catch 22 of further cuts, further losses or bold adjustment. And in Italy, things are only heating up.
Despite rising cost of oil and an ever increasing airline landscape, Emirates has established themselves as a solvent, powerful travel brand. It’s not to say the airline doesn’t face a constant uphill battle, but Dubai has established itself on the world tourism map, visitors are up above 14 million annually and it’s tough to beat the direct flights offered from top destinations all over the world, with fantastic onward connectivity. Emirates has also largely avoided aircraft acquisition issues, sticking with the Airbus A380 and Boeing 777 to service virtually all destinations. Etihad meanwhile, has faced issues with Boeing 787 Dreamliner engine issues.
Merger talks have been discussed publicly for over a year now, ever since Emirates CEO Tim Clark mentioned an openness to future collaboration. As both airlines fought the U.S. electronics ban, further collaboration brought respective alignments even closer. With both hubs of Dubai and Abu Dhabi roughly an hour away from each other, a streamlining of operations and sharing of revenues for the mutual benefit of both emerging UAE cities seems all too logical. Take the best of both operations and bring them into one powerful brand, while cutting losses from previous investment.
Sheikh Ahmed bin Saeed Al Maktoum Cools Rumors
His royal highness, Sheikh Ahmed bin Saeed Al Maktoum, the ruling leader of Dubai and Chairman of Emirates, appeared on Bloomberg TV this week, where his comments unequivocally cool any potential merger, saying ““Many people have reported there will be a merger. There is no such thing. Not at all. I think when we talk about synergy today, it is between Emirates and FlyDubai.” There have never been talks with Etihad about a merger”.
Shape Of The Future
A potential merger seems unlikely for now, but stranger things have happened. As travel expert Gary Leff points out, a consolidation would only work with Emirates in control. This would mean a shift of traffic from Abu Dhabi to Dubai, making it harder for Abu Dhabi to capitalize on visitors at the time it seeks to bolster numbers more than ever. Emirates would instantly benefit from less competition in the immediate region, while Etihad would see minimal benefit – except perhaps the chance to play another day.