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Etihad And Emirates Might Merge After All

The CEO of Emirates, Sheik Ahmed bin Saeed Al Maktoum, has revealed in an interview that a merger between his airline and neighboring Etihad is not completely out of the question. It’s the most positive signal we’ve ever had that the Middle East giants could be considering a collaboration, but he was clear on one thing: It won’t be happening this year.

Whenever the topic of a potential Etihad Emirates merger is raised, the answer from both sides is usually a resounding ‘not happening’. Hubert Frach, Emirates Chief of Commercial Operations in Europe and the Americas, was quoted in October last year as saying:

“We can make it very simple, very easy: There’s no truth to the rumor. No truth. And end of story.”

 

And just six weeks ago CEO of Etihad, Tony Douglas, was somewhat scathing in his comments regarding the possibilities of a merger, calling such notions ‘clownesque’. But perhaps his vehement summary of the situation was more of a coverup than genuine scorn?

What’s changed?

In essence, nothing yet. But if you’ve been following along, you’ll already know that there are a lot of big changes going on at Etihad right now. The airline is scaling back, dropping unprofitable routes and cancelling billions of dollars of aircraft orders following massive losses in the last 12 months.

It seems that the ruling family of Abu Dhabi are fed up with chucking money at the airline and not seeing a decent return on their investment. Perhaps they are starting to realize that there isn’t room in the Middle East for two very similar airlines, and that Emirates already has the market tightly sewn up.

But the biggest clue has come in the form of an interview with CNN and CEO of Emirates, Sheikh Ahmed bin Saeed Al Maktoum at the Arabian Travel Market in Dubai last week. According to our friends at Paddle Your Own Kanoo, Sheik Maktoum was asked by CNN,

“Will you be in a merger by the time you leave as Chairman as Emirates so we can get a timeline here?”

His response? Very telling:

“There is nothing to merit (a merger).  We’ve been cooperating and there is a relationship between the airlines but nothing towards a merger.  I don’t know what will happen after the next 5-10 years but as we speak today I know by next year there will be no such merger. Because if you look at the two model we are exactly the two similar models and they are too big airlines to put them together so it’s better to leave them.”

 

What does this mean?

Well, he is very right. The two airlines are far too similar in terms of business plans and strategies to make a merger a sensible choice, at least they are at the moment. However, with Etihad changing its strategy and scaling back aggressively, once it has transformed the airline, it could make a merger beneficial to both sides.

Right now, the two airlines are currently working closer together than they ever had in the past, which could be a signal that something is going on behind the scenes. If the two did merge, they would become the biggest airline group on the planet.

What do you think? Will we see an Emirates-Etihad merger in the next five to 10 years, like the Sheik alluded to? Or was he simply keeping his options open, and the speculators guessing?

Source: simpleflying