Lufthansa, Etihad deepen ties with catering, maintenance pacts

[ABU DHABI] Deutsche Lufthansa AG and Etihad Airways PJSC announced plans to establish a "new commercial partnership" with deals covering in-flight catering and aircraft maintenance.

The long-time adversaries have concluded a US$100 million agreement in global catering and signed a memorandum of understanding for cooperation in plane repair and overhaul, they said Wednesday at a press conference in Abu Dhabi.

The agreements, which build on recent announcements regarding joint ticket sales and aircraft leasing, come as Etihad grapples with losses from minority investments and Germany's Lufthansa struggles to cut costs and add low-cost flights amid opposition from trade unions.

Etihad Chief Executive Officer James Hogan, who plans to stand down later this year, said the accords are "the most significant" struck by the Middle Eastern carrier outside of its so-called "equity alliance" of minority shareholdings.

After years of clashes centered on Lufthansa's claims that Etihad and its Persian Gulf peers Qatar Airways and Emirates became major global players only with the help of illegal state aid, the two airlines have found themselves pushed closer together by changing circumstances.

Lufthansa, Europe's third-biggest airline, is struggling to keep pace with network rivals including British Airways owner IAG SA, which is tied to Qatar Air, just as discount operators led by Ryanair Holdings Ltd eat away at its market share on short-haul routes.

At the same time Etihad has begun reviewing its strategy after failing to halt losses at Air Berlin Plc, a Lufthansa competitor, and Italian flag carrier Alitalia SpA, in which it has built up holdings as part of an alliance tying together eight carriers from Europe to Australia.

Etihad and Lufthansa began working together last year, announcing a code-share agreement covering four routes and brokering a deal for Air Berlin to lease surplus planes and crews to the larger German carrier.

BLOOMBERG