Etihad, Lufthansa and EU Nationals Control
The LBA on 16 October 2014 reversed a decision to cancel 34 code share flights of Etihad and Airberlin that was taken a few days earlier. The reason for the earlier cancellation was that these code share flights violated the traffic rights agreement between Germany and the UAE. A meeting later in the month between both governments to discuss the bilateral will clarify things for the future. Lufthansa blames these code shares for the overcapacity on the Abu Dhabi route and called them unjustified.
Lufthansa has lobbied the EU to reexamine the control issues of foreign equity stakes in EU carriers and has lobbied for the courts to block Emirates Milan/JFK flights earlier in April 2014; those flights are now operated on a temporary authority pending an appeal's court decision.
Lufthansa has been more vociferous than most regarding the 3 Gulf carriers expansion into Europe. The EU now is examining whether Etihad controls Airberlin and Alitalia through its equity stakes and is also looking at the Delta/Virgin Atlantic deal. This has prompted the Swiss authorities to look at Etihad's control of Darwin Airlines now branded Etihad Regional.
The issue of foreign investors having control of EU carriers is becoming a thorny issue. There is a needed balance required between control and the investment risk of bailing out a European carrier and preserving jobs and airline services to communities. The major EU legacy carriers are coming under pressure from EU LCCs and apparently from the Gulf carriers that they are not willing to invest more but are looking to cut costs and curtail services. Air France/KLM declined to increase its stake in Alitalia and Lufthansa was not interested in a minority stake. Etihad worked very hard to get the unions and the creditors to accept its terms for its USD 750 millions direct investment for a 49% equity stake in Alitalia. The problems of Lufthansa and AF/KL are compounded by the mega orders from the Gulf carriers for Airbus aircraft with the associated economic fallout of order cancellations.
Etihad will modify its agreements with its equity partners to comply with the EU and Swiss regulators control requirements. Etihad did the same in India when the regulators questioned its control of the Jet Airways board. Etihad will not jeopardize its strategy for expansion; one that is based on equity partnerships providing access to new markets, cost savings in aircraft acquisition, maintenance and other services and more traffic through its Abu Dhabi hub.
The airline industry is more global than ever; the EU has to balance its requirements and need of EU nationals control of its airlines and the foreign investment in these airlines. These investments preserve jobs and services in Europe at a time when its economies are under pressure and their own carriers are not willing to invest.