Emirates Explores Etihad Deal To Forge Biggest Airline

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Dubai’s flagship airline Emirates is looking at taking over unprofitable neighbour Etihad, according to four people familiar with the matter, in a move that would create the world’s biggest carrier by passenger traffic.

The talks, which are at a preliminary stage, would see Emirates acquire the main airline business of Abu Dhabi’s Etihad, which would keep its maintenance arm, according to the people, who asked not to be named because the matter is confidential. The negotiations could yet fall through, they said.

Both airlines initially declined to comment, before later denying that any talks were underway. Were a transaction to go ahead the enlarged airline operation would be bigger than that of American Airlines Group Inc., which has a market value of $19.2 billion.

Any deal would require the blessing of the rulers of Abu Dhabi and Dubai. For Abu Dhabi, which sits on 6 percent of global oil reserves, it would advance a drive to overhaul state-controlled entities as it adapts to lower crude prices. The airlines have traditionally been arch rivals, with their hubs competing to attract the same transfer passengers making long-distance trips between Asia and the West.

Emirates Chairman Sheikh Ahmed bin Saeed Al Maktoum and President Tim Clark have previously played down speculation that the carriers might combine, Sheikh Ahmed saying in May that there have never been merger talks. Clark said in June that the question was one for shareholders, while adding that he saw nothing happening in the short-to-medium-term.