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Lufthansa teams up with rival Etihad in code-share deal
December 16, 2016 / 11:43 AM / in 10 months

Lufthansa teams up with rival Etihad in code-share deal

Planes stand on the tarmac during a pilots strike of German airline Lufthansa at Frankfurt airport, Germany, November 30, 2016. REUTERS/Kai Pfaffenbach

BERLIN/FRANKFURT (Reuters) - Lufthansa (LHAG.DE) has struck its first cooperation deal with a Gulf rival, agreeing to sell tickets jointly with Etihad Airways on some routes and leaving the door open to further agreements in other areas.

Germany’s biggest airline has been a fierce critic of Gulf carriers on the grounds their state backing gives them an unfair competitive advantage and it has in the past objected to code-sharing by German rival Air Berlin (AB1.DE) and Etihad.

Other airlines already work with fast-growing Middle Eastern carriers, however, and the code-sharing deal signed on Friday comes on top of Lufthansa’s agreement to lease planes and crew from struggling Air Berlin, which is 29-percent owned by Etihad.

Australia’s Qantas Airways (QAN.AX) has a similar code-sharing agreement with Etihad rival Emirates while British Airways has a revenue-sharing deal with Qatar Airways, which owns 20 percent of BA’s parent IAG (ICAG.L).

Independent industry consultant John Strickland said Lufthansa’s deal with Etihad was a positive move.

“Other major airline groups like IAG & Qantas have long seen the value of this,” he said.

Under the deal, Lufthansa will place its LH code on Etihad’s flights between Abu Dhabi and Frankfurt and Munich. Lufthansa had previously scrapped its Frankfurt-Abu Dhabi flights saying they were not profitable due to overcapacity created by the code-share deal between Etihad and Air Berlin.

Etihad will in turn put its EY code on Lufthansa’s long-haul services between Frankfurt and Rio de Janeiro and Bogota.

An Etihad Airways company aircraft takes off at the Charles de Gaulle airport in Roissy, France, August 9, 2016. REUTERS/Jacky Naegelen

The two will also consider extending their cooperation in other areas, Lufthansa CEO Carsten Spohr said in a statement.

Qatar and IAG, for example, have also cooperated on their cargo businesses.

A source said Lufthansa and Etihad were planning code shares on more routes. A Lufthansa spokesman declined to comment further on possible areas of cooperation.

Others analysts cautioned against reading too much into the deal, highlighting it was restricted in its scope for now.

“The limited code share agreement announced today is in our view a marginal price component for the Air Berlin deal,” Kepler Cheuvreux analyst Ruxandra Haradau-Doeser said, adding that she did not think a deeper partnership was likely.

Strickland said the tie-up also showed pragmatism in light of the Air Berlin so-called wet lease deal, which will remove some excess capacity from the European market.

Airlines have made a flood of seats available this year, taking advantage of lower oil prices to try to grab market share, but this led to lower ticket prices and put airline profits under pressure.

Of the 38 Air Berlin planes in the wet lease deal, 33 A319 and A320 jets will go to Eurowings, which Lufthansa is expanding rapidly.

Eurowings will use the Air Berlin planes to replace 20 older A320 jets, removing some of the extra seats from the market. Also, Eurowings said it will station four planes at a new base in Munich, traditionally a hub for Lufthansa-branded flights.

Additional reporting by Maria Sheahan,; editing by Greg Mahlich and David Clarke

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