Etihad has been on a rapid buying spree in the past two and a half years. Silvia Razgova / The National
Etihad has been on a rapid buying spree in the past two and a half years. Silvia Razgova / The National

Etihad open to taking stakes in more carriers after Jat Airways deal



James Hogan, the Etihad Airways president, has suggested the carrier would consider taking further stakes in airlines as it wraps up its latest investment deal.

The Abu Dhabi airline last week announced a 49 per cent shareholding in Jat Airways, the Serbian national carrier to be renamed Air Serbia, and was given the green light by India's foreign investment promotion board to move ahead with taking a 24 per cent share of Jet Airways.

Before these investments emerged, Mr Hogan said in December that Etihad would bring its acquisition strategy to a close after the completion of two further deals. But speaking after the Jat Airways tie-up, he said it "may" pursue other stakes if the opportunity was commercially viable.

"It has got to make sense. It's got to meet our criteria," he said. "Does it link with our network? Does it have a true commercial mandate? Can we restructure so it moves to profitability? It's not a race. We get lots of opportunities and we have to review them. If they don't make sense we don't play."

Etihad has been on a rapid buying spree in the past two and a half years. In addition to last week's agreements, it owns 29.2 per cent of airberlin, 40 per cent of Air Seychelles and also has shareholdings of 10.5 per cent in Virgin Australia and 2.9 per cent in Aer Lingus.

Such investments, together with 43 codeshare agreements with other airlines, are proving an effective tool to complement organic growth in the fiercely competitive Middle East aviation market.

Mr Hogan said ensuring good chief executives were in place at the airlines it bought stakes in and parachuting in Etihad executives when needed helped to ensure the equity alliances did not drain the airline's management resources. The risk of strain on Etihad's management was one reason he had previously given for shelving the equity alliance strategy.

"We appoint our chief executives or they have good chief executives already in," he said. "We have good executives that we're able to post to these businesses, that gives us a benefit, too, as we're able to broaden their skills and experience business. But what we don't do is manage the day-to-day operations."

After being awarded five-year contracts to manage the operations of Air Serbia and Air Seychelles, Etihad appointed its own chief executives to both carriers. At airberlin it drafted in three Etihad executives to help to turn the airline around, with the staff returning to Abu Dhabi afterwards.

Mr Hogan said Etihad was keen to strengthen its shareholding in Virgin Australia. Last month it received approval from Australia's foreign investment review board to up its previous stake of 10 per cent in Virgin Australia to 19.9 per cent.

"We have a great relationship [with Virgin Australia] and they'll be in Abu Dhabi in the next 30 days and we're very keen to strengthen our position with them," he said.

The smuggler

Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple. 
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.

Khouli conviction

Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.

For sale

A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.

- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico

- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000

- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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