Back in 1985 the Dubai-based Airline “Emirates” started off operations with two leased aircraft: a Boeing 737 and an Airbus A300-B4. During many years they operated with a growing product & fleet, and in 2003 the first big concurrence, Etihad Airways took operations out of Abu Dhabi, the capital of the UAE. In the last few years both Airline have been operating independently and with a big success. By concluding partnerships or by investing in other airlines around the world, they have revolutionized the air travel. In order to expand in future, we think that both Airline should merge. The purpose of this article is to describe why we believe such a merger should happen in the next few years, and explain how it will happen.
The airline Emirates:
After starting operations in 1985 with two leased aircraft, the Airline Emirates expanded their network to one of the biggest in the world. Today the carrier counts 109 Airbus A380-800 & 164 Boeing 777-300ER. They are flying to 158 destinations around the world & are transporting almost 60 million passenger per year. Last week the airline announced they would reduce their A380 order from 160 to 124 aircrafts, but therefore expand their fleet with Airbus A330-900neo & Airbus A350-900.
In the financial year 2017-2018 they made 4 billion AED profit and employed over 62’000 people. A big highlight for the airline in 2018 was their new introduced Boeing 777 cabin “Game Changer”. We visited the aircraft, the video can be found here.
Emirates is owned by the government of Dubai.
The airline Etihad Airways:
Etihad Airways started operations in 2003 out of the capital of the UAE capital city: Abu Dhabi. Etihad Airways is today part of the EAG Group, that is owning 49% of Alitalia, 24% of the Indian carrier Jet Airways, 20.94% of Virgin Australia, 40% of Air Seychelles, 49% of Air Serbia & 33,3% of Etihad Regional. The group used to own 29.21 % of the now grounded Air Berlin.
The Airline is as of 28 of February 2017 (latest annual report) owning 112 passenger jets. With 35 aircraft the Airbus A320 is the aircraft that the airline operates the most. The fleet is very wide & should soon get bigger with the delivery of the Airbus A350. Etihad Airways flies to 112 destinations around the world and carries around 20 million passengers per year (as of 28.02.2017). They employ around 27’000 people out of 153 nationalities. Sadly, the revenue of the company has been challenging since 2016. This is due to the rising price of oil, the loss of Air Berlin in 2017, and the loss of Alitalia.
Etihad Airways is owned by the government of Abu Dhabi, the wealthiest member of the UAE.
The United Arab Emirates:
The UAE is a merge of seven emirates:
- Abu Dhabi
- Ras Al Khaimai
- Umm Al Quwain
Six of the emirates have been merged together to the UAE in December 1971. The last emirates, Ras Al Khaimai, acceded the new merged federation in February 1972. All seven emirates are ruled by their own monarchy, with the highest person in charge being his honor the Sheikh. The founder of the UAE back in 1972 was H.H. late Sheikh Zayed bin Sultan Al Nahyan. He is known als the father of the union. 2018 was the “Year of Zayed” to celebrate his 100th birthday. H.H. late Sheikh Zayed bin Sultan Al Nahyan sadly passed away in 2004. As of 2017 9.3 million people lived in the UAE.
Currently The Al Nahyan Royal Family is ruling over the emirates of Abu Dhabi. Ruling over the Emirates of Dubai is The Al Maktoum Royal Family.
The relation with the state of Qatar:
The relation between the UAE & the state of Qatar, despite current tensions, is very important for a potential merger of the two airlines. A solution to the June 2017 Qatar political crisis would be constructive for the marriage.
In June 2017 the Gulf Cooperation Countries coalition cited that Qatar’s alleged to support terrorism and violated the GCC Agreement passed in 2014. Since then 12 Governments (including the UAE) banned Qatar airplanes to enter their airspace. All flights between Dubai, Abu Dhabi & Doha have been cancelled without substitute. Currently the only way to get from Qatar to the UAE in the region is to fly throughout a third-part country like Oman or Kuwait. It is not yet known how the diplomatic future between the countries willlook like.
Why would a merge make sense?
Both Airlines are offering one of the best air-travel product currently available on the market for the same price than other Airlines do. Back in 2018 Bloomberg made public that some unnamed sources would say that Emirates & Etihad will merge. The plan would be for Emirates to buy the smaller company Etihad and become the biggest Airline in the world. This statement was declined by both Airlines, and since then no big media has been talking about it.
What we know today is that both carrier are currently cooperating on some points like the crews. A signed deal allows Etihad Airways pilots to join Emirates for a limited time of two years. Beside that some sources revealed to Reuters, that both Airlines would be merging their ticketing system & the catering. None of this has been declined or approved by Etihad Airways. Emirates declined this statement upon request.
I think that a merger would make sense, but Emirates wouldn’t become the biggest Airline in the world. The state of Abu Dhabi invested too much money into the company, the airport, and other aviation-related matters in the last 15 years to let the brand go like this. A logical outcome would be to merge the companies, but still let them run independently as “Etihad Airways” & “Emirates”. Now you might ask yourself why they should do it? Well after many researches we came to two concluding points :
Deficit of Etihad Airways
As already mentioned, Etihad Airways was not profitable in 2016 & 2017. The facts & financial numbers for 2018 have not been published yet. If Etihad Airways continues to lose income in the next year, the management will need to take decisions. A lot of money has been invested in the company and its potential is very big. Letting the airline ground because of the lack of money is clearly no option. A merger with Emirates would mean more liquidity to continue operations, but also more slots & possible EY flights departing from Dubai. If Etihad can continue to operate out of Abu Dhabi but additionally also out of Dubai, the profit could rise up again.
Beside the additional routes & slots, Etihad Airways could take profit of the Emirates Ground Services, Maintenance & Know-How. This would also mean a heavy reduction of the costs.
Dubai Expo 2020 / FIFA World-Cup 2022
Two big events are due in the Middle East in the next 3 years. The Expo 2020 in Dubai & the Fifa Soccer World-Cup in Doha in 2022. Those events are my biggest reason to believe that a merger is probable before those take place.
2.7 million people live in the State of Qatar, by 2022 it could be around 3 million. Over 9 million people live in the UAE. The world-cup is due to happen over 4 weeks and shortly before Christmas. This means that people are going to fly in from many countries, watch a few games & get back home. This is representing a huge potential for the aviation industry. Multiple million people will fly to Doha. Now if you remember correctly the diplomatic situation between countries in the Middle East & the State of Qatar is currently not good. So, this would mean that people wishing to see the world-cup will need to fly directly with Qatar Airways, which is also offering an amazing experience, or fly throughout Kuwait & Oman.
If the GCC and Qatar manages to improve their relations before the world-cup and ideally in 2019/2020, UAE airlines would again be able to fly from Dubai/Abu Dhabi to Doha. This would also work the other way around, from Doha to Dubai & Abu Dhabi, representing huge additional profit for Emirates, Etihad & Qatar Airways. it is therefore in the interest of the State of Qatar to improve relations by then, as QR is also owned by the State of Qatar. We are talking here of millions of people, millions of tickets sold & a lot of “shuttle-planes” from other countries in the Middle East to Qatar.
If the relation between the two countries will be improving before the World-Cup, Emirates & Etihad will have the perfect time-frame to merge. This is due to the fact that they could send maybe 50 planes a day from Dubai & Abu Dhabi to Doha. Taking a Boeing 777 or an Airbus A380, they could maximize their profit, something Etihad Airways urgently needs. This would although require both airline to have every detail ready by then. Now if you remember I mentioned earlier that the carriers were sharing crews, and according to sources merging catering & ticketing system. This is not just like this for fun, it’s because the companies are preparing what could become the merger of the century for the airline industry.
In my eyes a merger is probable by 2020, at the latest in 2021, a few months before the biggest World-Cup ever create will start.
Maybe the merger will happen before the world-cup & already for the Dubai Expo in 2020 in order to let Etihad Airways land in DXB (Dubai International) or DWC (Dubai World-Central). It would be interesting for the Abu-Dhabi based carrier to fly passengers directly into Dubai, and not into Abu Dhabi and then by car or bus to Dubai. If the merge is due to happen before the Expo 2020, it is probable that it will happen in 2019. This would mean direct flights for Etihad Airways to Dubai, more tickets selling, and finally stop the loss and being able to make profit again.
In the end I think you understand my point. It is all about saving costs and make Etihad portable which has not happened in recent year. Such merger could be dragging for some time however for political reasons and also mainly because the Al Nahyan Royal Family does not wish to sell Etihad to Emirates. Again a merger is more likeable as it would “rescue” the company and give her new horizons.
Dubai International is currently as Emirates Hub the biggest airport for international traffic. With the opening of Dubai World Central, and a possible operation on four runways, over 200 million passengers could be welcomed into the new airport, offering Etihad to fly to Abu Dhabi, but also to Dubai.
A negative point that would be a logical cause of the merge might be higher tickets prices, as the concurrence within the Middle East would be reduced.
A spokesman of Emirates declined the fact that sources cited ticketing & catering would be merged. They also declined the fact that a merger would be in a term a possibility for the company. He confirmed that the airlines were sharing pilots, a, I cite: “Usual process in the industry”.
Etihad Airways was not reachable for any statement. This show that the topic is very sensible.
To conclude this article, I personally think that a merger would make a lot of sense for both Airlines. Not to forget is that the fusion is not likely to happen before a few months or even a few years. The merger would be full of benefits for Etihad & for Emirates. They could extend what could become the biggest network in the world by continuing to fly under the name “Etihad Airways” & “Emirates” and therefore keep local sensibilities intact.
Thank You for reading! I hope you enjoyed this extensive analyse about the possible merge of the century.
Disclaimer: This article is reflecting our own opinion and has been produced after heavy researches have been made. Etihad Airways, Emirates, or any other cited company has verified or approved this article. We do not take responsibility for the providen information. On request we can provide where we got the information from, as all of it is public. This article is a pure analyse & prediction. This article is copyrighted and if copied "YourAviation / Colin Voide & Ram Kumar" will need to be providen as source.