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Abu Dhabi's Etihad takes another step towards becoming a mid-sized airline

Etihad Airways is a step closer to re-sizing itself into a mid-sized airline after disposing of its stake in Air Seychelles.

The Abu Dhabi airline said it sold its 40 per cent take in Air Seychelles back to the Seychelles government. Although Etihad’s management contract has been terminated, Remco Althuis and Michael Berlouis will remain on as CEO and CFO respectively until June 30, to assist with the transition.

“In the wake of the current crisis, the divestiture of Etihad's stake in Air Seychelles is part of the clean up process to emerge as a mid-size carrier with less financial burdens from the past,” said Linus Benjamin Bauer, Managing Director of Bauer Aviation Advisory.

The airline’s only remaining airline investment is in Air Serbia, though that stake has been reduced from 49 per cent down to 18. “Selling its last stake in Air Serbia would be very much in alignment with Etihad's new strategy to become a boutique airline with a focus on premium in the post pandemic era,” Bauer added.

Much like boutique hotels, boutique airlines are a category of their own, with an emphasis on lifestyle branding. The current status of Etihad’s stake in Jet Airways is not clear after the struggling airline was taken over by Kalrock Capital and Dubai-based Murari Lal Jalan. Since Jet Airways is not flying currently, Serbia’s flagship carrier is the only active airline in Etihad’s portfolio.

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What happens next

“This is a time of opportunity for both Air Seychelles and the country, as tourism starts to rebuild following the reopening of its borders,” an Etihad spokesperson said. “Etihad remains committed to Air Seychelles as a commercial codeshare partner.

“Seychelles is an important destination on Etihad’s global network, with bookings steadily increasing following its reopening to tourism.”

Air Seychelles plan of action
"Etihad’s strategy of investing in other airlines ended before COVID-19 - It just took a while for the divestments to be completed," said Brendan Sobie, an aviation analyst. Air Seychelles, which already restructured in 2018 and dropped long-haul and widebody aircraft, will continue to follow the more regional focused strategy it has been following since before COVID, said Sobie.

Changing tactics

The talks were first revealed by Air Seychelles’ CEO during a virtual event last month,” said Remco Althuis, the airline’s head. “I think everyone following the industry knows that Etihad is changing its strategy. And so their partner strategy is no longer being pursued, and as part of that, they're divesting their stakes in other airlines.

“Obviously, relationships with airlines like Etihad Airways will remain an essential part of our vision moving forward.”