Etihad Airways and Air Arabia to set up low-cost carrier

New booking engine, mobile app, and self-service tools to empower guests and ensure a smooth experience at every step of the journey

This would be under a joint-venture company, branded “Air Arabia Abu Dhabi.” The intent is for this to complement the operations of Etihad Airways, and serve the growing low cost market in Abu Dhabi.

While Air Arabia is based in Sharjah, the airline has already set up similar joint ventures elsewhere, including Air Arabia Maroc and Air Arabia Egypt, with 10 and three Airbus A320s, respectively.

Sharjah-based Air Arabia, the UAE’s only listed airline, has operating bases in Morocco, Egypt, and UAE’s Ras Al Khaimah.

Etihad Aviation Group CEO Tony Douglas said: “Abu Dhabi is a thriving cultural hub with a clear economic vision built on sustainability and diversification. By partnering with Air Arabia and launching Abu Dhabi’s first low-cost carrier, we are serving this long-term vision. We look forward to the launch of the new airline in due course.”

It remains to be seen what the route network for the airline would look like, how many planes they’d have, and when exactly it will launch. Presumably they would use A320s for the operation, featuring just one class of service.

Etihad Airways Already Headed In Low Cost Direction

There are a variety of reasons this move is interesting. One of those reasons is that as Etihad is undergoing their transformation, they’ve unarguably been moving more towards a low cost model than before.

For example, the airline is removing personal televisions from their narrow body planes, they’ve introduced food and drinks for sale, added “basic” fares, and more.

Etihad Airways’ new seats without personal televisions

Now, ultimately they could still probably lower costs a bit by hiring lower paid pilots and flight attendants, squeezing more seats into planes, and not offering any food or drinks.

At the same time, there’s not all that much differentiation here. It seems silly to both form a low cost carrier while also moving your mainline operation to more of a low cost model.

To me this seems somewhat counterproductive:

  • This will create brand confusion among Etihad customers, to have a new airline branded as “Air Arabia Abu Dhabi” that’s part of the Etihad family.
  • Won’t this low cost carrier put downward pressure on yields, and take away customers from Etihad? Given that Etihad wants to increase yields and load factors, this doesn’t seem very logical.
  • All of this doesn’t address the long term concern of trying to have two global hubs just a short drive apart (with Abu Dhabi and Dubai).

Emirates & FlyDubai Also Have A Partnership

In Dubai there’s Emirates and FlyDubai. Historically the airlines didn’t cooperate all that closely, though over time they’re working more closely together, and that’s in everyone’s best interest.

There’s one major difference there, though. Emirates exclusively operates wide bodies (their smallest plane is a 777), while FlyDubai exclusively operates 737s.

The benefit of the cooperation there isn’t just the difference in the cost structure, but also that FlyDubai flies to lots of places that Emirates can’t fly to.

That’s not the case at Etihad Airways — they operate narrow body planes as well, so this isn’t about giving the airline more reach, but rather is about lowering costs.

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