'Game-changing' deal for Etihad and Air France-KLM

Etihad Airways and Air France-KLM are expected to announce one of the biggest deals the European airline industry has seen today.

Etihad Airways is set to confirm it is on track to carry 10 million passengers this year, outperforming forecasts. Andrew Henderson / The National

Etihad Airways and Air France-KLM are expected to announce a "game-changing" alliance today.

"This will be one of the biggest deals the European airline industry has seen. It is a major, multi-faceted commercial partnership that goes way beyond simple code-sharing," said an industry source last night.

If the announcement is made today, Air France-KLM is expected to confirm a separate agreement with Air Berlin, the German carrier that is 30 per cent owned by Etihad.

Etihad, meanwhile, is set to confirm it is on track to carry 10 million passengers this year, as seat revenues from existing code-share deals jumped by more than 50 per cent in the past three months and its partner airlines outperformed management forecasts.

Presenting the UAE airline's third-quarter results yesterday, James Hogan, the president and chief executive of Etihad, attributed the improvements to the company's unique partnership strategy.

"We are particularly pleased with the contribution from our code-share and equity partners. This component of our strategy is delivering a strong and growing revenue stream, complementing our own double-digit organic growth," said Mr Hogan.

No details of the Air France-KLM deal were available last night, and nobody at Etihad was available for comment. Etihad's results showed total revenues of US$1.3 billion, (Dh4.77bn) up 19 per cent on the third quarter of last year, with record passenger revenues at $937 million, up from $833m

Driving the figures were passenger numbers, up 23 per cent, with 2.79 million travellers carried in the quarter compared with 2.27 million for the same period last year. The airline also sold a record number of seats per flight, with an average seat occupancy of 81.2 per cent, the best quarterly performance by the airline, and revenues continued to outperform the airline's growth in capacity.

"Etihad Airways remains confident of achieving full-year profitability for the second year running. Our third quarter saw continued progress across the business, with all key indicators showing strong performance and we remain confident of delivering full-year profitability based on current market conditions," the airline said.

Air Berlin has generated $51m in revenues for Etihad so far this year, surpassing the initial full-year estimates, and Air Seychelles, in which Etihad holds a 40 per cent stake, remains on track to break even this year, in the first year of Etihad's five-year management contract, confirming a dramatic turnaround in the airline's economic fortunes after several years of heavy losses.

Virgin Australia, in which Etihad holds a 10 per cent stake, continued to deliver a strong contribution, with code-share revenues for Etihad up 16 per cent year on year.

Cargo revenues were significantly ahead of last year, up 6 per cent to $181.6m. Etihad Cargo carried 93,560 tonnes of freight in the quarter, 18 per cent more than in the corresponding period last year. The airline's dedicated freighter fleet of six aircraft now serves eight cargo-only destinations at Amsterdam, Benghazi, Dubai, Hahn (Frankfurt), Hong Kong, Djibouti, Kabul and Sharjah.

Freighter services were launched to Dammam and Doha during the quarter, increased to Libya and Italy, and upgraded to Hong Kong.

Fuel remained the single largest operating cost for the business and represented 37 per cent of total expenditure for the quarter.

"We continue to face an incredibly tough operating environment. Fuel prices remain high and the global economy still carries challenges," Mr Hogan said.

"The euro zone remains in trouble and there is still some softness in a number of Middle Eastern markets."

Etihad launched daily services to Lagos during the quarter, with new routes to open to Ahmedabad and Addis Ababa next month, and new routes to Washington, São Paulo and Ho Chi Minh City next year.

Ahead of schedule, b4