Etihad says is buying stakes in Europe to compete, not control

ABU DHABI (Reuters) - Abu Dhabi's Etihad Airways on Sunday said its strategy of buying stakes in European airlines was bringing fresh competition to the region, despite close scrutiny by regulators over whether its investments comply with European ownership rules.

State-owned Etihad is building up a network of minority stakes in airlines around the world as it seeks to drive traffic to its Abu Dhabi hub.

"We are bringing competition in the market. Some legacy carriers are using the European Commission to challenge us rather than challenge us through competition," James Hogan told reporters on the sidelines of a conference in Abu Dhabi.

"We are open with our strategy, we can't own or control any carrier because of bilateral, ownership rules," he said.

Etihad currently has holdings in Air Berlin , Air Lingus and Air Serbia, and is looking to buy a chunk of Italy's ailing carrier Alitalia .

However, it has come under scrutiny from the European Commission which is examining several foreign holdings in European airlines to see if they comply with rules for operating an airline within the region.

These include Etihad's stake in Germany's Air Berlin, along with Delta Air Lines' holding in Britain's Virgin Atlantic .

In order to obtain an operating license in the EU as a European airline, a carrier must be more than 50 percent owned and "effectively controlled" by an EU member state or EU citizens.

Etihad owns 29.2 percent of Air Berlin and a majority stake in its frequent flier program. It recently invested 300 million euros in the German airline via convertible bonds.

SKY SUITES

State-owned Gulf airlines, backed by strong oil revenues, are competing for dominance in the aviation industry and a larger share of the passenger base.

On Sunday, Etihad unveiled plans for passengers on its new Airbus A380s to fly in a three-room suite with a private butler, as it looks to woo high-end passengers from its biggest rival and top superjumbo customer Emirates .

Dubbed 'The Residence', the upper deck of the A380 would be transformed into apartments, a global first in the aviation industry, featuring a living room, separate double bedroom and ensuite shower room.

Etihad will take delivery of the first of its 10 A380s in December to service the Abu Dhabi-London route. The first of its 71 Boeing 787s will also be delivered in December.

Dubai's Emirates already has dozens of super jumbos in operations and was the one of first to introduce showers for its first class customers.

Etihad will also offer an enhanced first class suite on its new Boeing 787s.

(Reporting By Stanley Carvalho; Editing by Sophie Hares)

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