Etihad seeks pact to feed European passengers

Etihad Airways, the Middle East\'s third-largest carrier, took a stake in Ireland\'s Aer Lingus Group Plc as it extends a strategy of investing in European operators to help feed passengers via its hub in Abu Dhabi. Etihad has built up a 2.99 per cent holding in Aer Lingus, the Dublin-based company said on Tuesday, helping to boost its stock as much as 6.2 per cent, the most in 11 weeks. The stake could be increased should the pair reach an agreement on an alliance. \"Aer Lingus and Etihad are engaged in discussions which to date have focused on reciprocal code-share opportunities,\" Aer Lingus said in a statement. \"Future discussions may explore additional commercial and cost opportunities to develop a closer working relationship in areas such as joint procurement.\" Ireland\'s government said Feb. 9 that there had been \"strong interest\" in its 25 percent holding in Aer Lingus and that all approaches would be considered in the event of a decision to sell. Etihad Chief Executive Officer James Hogan said the same day he was looking at the Irish carrier after spending $350 million in equity financing and funds for planes to take a 29.2 percent holding in Germany\'s Air Berlin Plc. Etihad\'s investment in Aer Lingus reflects its desire to forge a \"commercial partnership\" that would be beneficial to both carriers, the Gulf company said in an e-mailed statement. \"This suggests that Etihad will be at the table when Aer Lingus is put up for sale,\" said Joe Gill, an analyst at Bloxham Stockbrokers in Dublin, adding that the state will probably dispose of its holding in the next six to 12 months. CEO Hogan has said that he views signing deals and taking stakes in smaller operators in key markets as a vital complement to spending money on planes as he builds Abu Dhabi into a hub for inter-continental travel. Dubai-based Emirates, the largest international airline, has nine codeshare accords and no foreign holdings, while Etihad had 35 partners as of March 5. Aer Lingus said in its statement today that negotiations with Etihad are a natural progression from its Greenfield cost- reduction program, introduced in 2009, which was forecast to save 80 million euros ($106 million) last year. Etihad has told Aer Lingus that after taking the initial holding it \"does not intend to increase this stake, pending the outcome of the discussions,\" the statement said, adding that there can be no certainty as to the outcome of the talks. Aer Lingus shares advanced as much as 6 cents and were trading 3.5 cents higher at 1.01 euros as of 8:15 a.m. in Dublin, a gain of 3.6 percent. The stock has advanced 59 percent this year, valuing the company at 535 million euros. Etihad said it couldn\'t immediately comment on Aer Lingus\'s statement, which followed reports of an investment by the Gulf carrier in today\'s Irish Times.