The new Air Arabia Abu Dhabi will be launched in due course: Etihad CEO Etihad invested heavily in carriers around the world LONDON: Etihad Airways is setting up a low-cost carrier with Air Arabia in what is a major change of direction for the Abu Dhabi-based airline. It represents Etihad’s first tie-up with another airline since its ill-fated equity alliance strategy which saw it take stakes in a number of struggling European carriers, some of which went bust, including Air Berlin. Air Arabia Abu Dhabi will operate from Abu Dhabi International Airport and will target rising demand from the budget segment, the pair said in a statement on Wednesday. Etihad Group CEO Tony Douglas said: “This exciting partnership supports our transformation program and will offer our guests a new option for low-cost travel to and from Abu Dhabi, supplementing our own services.” Abu Dhabi-based Etihad and Dubai-based Emirates invested heavily in their premium-cabin offering during the UAE’s boom years, tapping into strong regional demand for business and first-class travel. However, the sharp fall in oil prices since 2014 and a regional economic slowdown has hit premium travel hard and forced both carriers to cut costs and lay off staff. Etihad’s move into the low-cost segment mirrors a similar partnership between Emirates and flydubai, the low- cost carrier started in 2008. Etihad and Air Arabia did not say when flights would start or which routes would be served, but that further details “would be communicated in the near future.” While premium travel continues to face headwinds in the Gulf, demand remains strong in the budget segment. Low-cost carriers accounted for a 17 percent share of seat capacity to and from the Middle East in 2018, compared to only 8 percent in 2009. Etihad Airways currently flies to about 80 destinations with a fleet of 108 Airbus and Boeing aircraft that carried 17.8 million passengers in 2018. Air Arabia, which is listed on the Dubai Financial Market, operates 54 Airbus A320 and A321 aircraft and serves 170 routes.