Emirates is looking at taking over unprofitable neighbor Etihad, Bloomberg reported quoting people familiar with the matter. If the plan materialises, it would create the world’s biggest carrier by passenger traffic.
Bloomberg said the talks, which are at a preliminary stage, would see Emirates acquire the main airline business of Abu Dhabi’s Etihad, which would keep its maintenance arm.
Both airlines initially declined to comment, before later denying that any talks were underway. Were a transaction to go ahead the enlarged airline operation would be bigger than that of American Airlines Group Inc., which has a market value of $19.2 billion.
The report said any deal would require the blessing of the rulers of both emirates. For Abu Dhabi, which sits on 6 percent of global oil reserves, it would advance a drive to overhaul state-controlled entities as it adapts to lower crude prices. The airlines have traditionally been arch rivals, with their hubs competing to attract the same transfer passengers making long-distance trips between Asia and the West.
It said Emirates Chairman Sheikh Ahmed bin Saeed Al Maktoum and President Tim Clark have previously played down speculation that the carriers might combine, Sheikh Ahmed saying in May that there have never been merger talks. Clark said in June that the question was one for shareholders, while adding that he saw nothing happening in the short-to-medium-term.
According to the report, a combination of the airlines would provide further evidence of the sheikdoms consolidating businesses to boost competitiveness. Abu Dhabi and Dubai companies formed Emirates Global Aluminium, one of the world’s largest producers, in a $15 billion combination in 2013, and the two have studied a merger of their stock exchanges. The Dubai government was also the driving force in compelling Emirates to cooperate with local discount carrier FlyDubai.
The report points out that Etihad has been shrinking its operations following the failure of a so-called equity alliance strategy that saw it invest in a number of generally ailing foreign operators to help feed more traffic through Abu Dhabi. One of those, Air Berlin Plc, collapsed last year while another, Italy’s Alitalia, filed for bankruptcy protection, causing the pact to largely unravel.
