Etihad growth strategy is risky

10 October 2013

The carrier is expanding using codeshares, but it is unable to guarantee service standards

As the last of the Gulf carriers to launch, Etihad Airways has had to find innovative ways to rapidly grow its route network to compete with regional rivals.

The Abu Dhabi airline has chosen to follow a strategy of expanding on the back of well-established international airlines through equity stakes and codesharing agreements. Its most recent acquisition was a 49 per cent stake in Serbia’s national airline, Jat Airways, which was finalised in August.

Etihad now has equity interests in six carriers and more than 46 codeshares. This compares with 12 codeshare agreements held by both Dubai’s Emirates airline and Qatar Airways.

But it is a strategy that is filled with risk. Codesharing deals can be damaging to an airline’s brand if the standards of service offered by the partner airline fail to match those associated with the company from which the passenger has bought the ticket.

Like Emirates and Qatar Airways, Etihad has sought to market itself as an airline that offers high levels of comfort and high-quality inflight catering and entertainment services. But it has no control over the services provided by its partner airlines. With such stiff competition in the Gulf aviation industry, disappointed passengers can easily find other airlines to use. Customer loyalty is much prized by the sector, and once lost, can be hard to win back.

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