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Lufthansa’s chief executive said Gulf aviation would be hit by a wave of rationalisation as regional carriers are hit by lower growth projections are forced to cut capacity.

Carsten Spohr was attending an event with Abu Dhabi airline Etihad to launch a codeshare agreement, as well as a $100m four-year deal for Lufthansa’s LSG Sky Chefs to provide catering to Etihad outside of the UAE, and a memorandum of understanding for maintenance cooperation with Lufthansa Technik.

“There is more and more indication that – as we say in German – trees don’t grow to the sky in Gulf aviation,” he told reporters at an event in Abu Dhabi.

“Therefore finding smart partnerships like Etihad has done with us, and limiting growth will play a bigger role in the next 12 months than in the last ten years.”

Gulf carriers, including others such as Dubai’s Emirates and Qatar Airways, have been growing strongly through fleet expansion and linking Asia with Europe and the Americas.

But slowing global demand has hit their expansion plans. Emirates announced a 75 per cent decline in profit growth last year and has, along with Etihad, been forced to make redundancies among support services.

“The growth expectations for global aviation will not fully live up in the next years to some of the projections I have seen – optimisation and rationalisation of capacity will need to play a bigger role,” said Mr Spohr.

“This industry needs to see a healthier relationship between offer and demand, and I am optimistic that we will see this in the years to come.”

Gulf carriers, including Etihad, face a challenge from US airlines who have been calling on the US government to sanction the three carriers for taking state subsidies – a charge denied by the carriers.

Mr Spohr, a critic of state subsidy for airlines, said he could have a “different perspective” to his partners and still find “common areas of operation.”

Etihad and Lufthansa were celebrating the first day’s operation of a codeshare on Etihad’s twice daily flights to Frankfurt and Munich, and once government approval is received, on Lufthansa flights to Rio de Janeiro in Brazil and Bogata, Colombia.

The airlines said the agreement would expand Lufthansa’s reach in the Indian subcontinent while Etihad would gain access to South America via Germany.

Etihad will move its operations into Lufthansa’s German hubs in Frankfurt and Munich.

Copyright The Financial Times Limited 2017. All rights reserved.
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