Air France-KLM, Etihad, Air Berlin Plan Partnership

October 8, 2012

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Air France-KLM, Air Berlin and Etihad plan to offer passengers access to some of each other's services from October 28 in a sign of improving relations between European and Gulf carriers.

A code-share deal with Air France-KLM will enable Etihad customers to fly on KLM's daily Amsterdam-Abu Dhabi flight, while Air France customers will be able to travel on the daily Etihad service between Paris and Abu Dhabi, Air France-KLM said in a statement.

At the same time, Air France announced a new code share agreement with Air Berlin, in which Etihad Airways holds a 29.21 percent stake.

The deals are seen as a further step towards improved relations between European carriers and younger state-backed Gulf carriers, which are growing aggressively to gain scale globally.

The relative success of the Gulf carriers has been met with charges of unfair competition by struggling European and US airlines, but some industry leaders like International Airlines Group chief executive Willie Walsh have backed more alliances between the two camps.

Sources close to the oneworld alliance, which includes IAG's British Airways and American Airlines, said last week that Qatar Airways will become the first Gulf carrier to join that alliance in a deal to be announced this week.

Etihad, which is in competition with regional rivals Emirates and Qatar Airways, said the deal would be the first phase of a much larger strategic partnership.

The agreement also will offer additional lucrative long-haul routes to Air France-KLM passengers, enabling the carrier to save on marketing expenses at a time when it is cutting staff and trimming its short-and medium-haul fleet to lower costs.

The airline is facing increasingly tough competition from low-cost carriers in Europe, where its employee costs make it harder to compete, while Gulf carriers are also eating into its long-haul premium business. The French flag carrier is shedding more than 5,000 jobs as it tries to return to growth.

Etihad has steamed ahead with its growth strategy this year, signing code share deals and picking up stakes in four carriers including Air Berlin, Virgin Australia and Aer Lingus.

It will look to secure more airline stakes, its chief executive said.