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Gulf airline Etihad partners with Air France-KLM

DUBAI, United Arab Emirates -- Rapidly expanding Gulf carrier Etihad Airways has agreed to jointly market some of its flights with Air France-KLM in what could be the beginning of a larger strategic alliance, the airlines said Monday.

The deal for now covers codesharing on flights between Etihad's hub in the United Arab Emirates' capital Abu Dhabi and Amsterdam and Paris, as well as some connecting flights to European, Asian and Australian destinations.

Codeshare deals, in which passengers can buy a single ticket to fly on multiple airlines, are common in the airline industry. They allow carriers to expand their reach without having to launch or acquire the right to operate additional routes.

Etihad, though, is suggesting the agreement may lead to deeper ties with the Franco-Dutch airline operator. Its statement envisions the codeshares as the first phase of a "much larger strategic partnership" that could see the airlines team up on frequent flier programs, and cut costs by cooperating on procurement, aircraft maintenance and repairs.

Air France-KLM has also agreed to share its codes with Etihad partner Air Berlin on routes between France and Germany. Etihad bought nearly 30 percent of Air Berlin last year and has been strengthening business ties with the airline as it seeks to expand its reach in Europe.

The deal comes just over a month after Etihad rival Emirates, based in nearby Dubai, signed a 10-year partnership deal with Qantas Airways. That agreement calls for Qantas to move its hub for European flights from Singapore to Dubai and coordinate with Emirates on ticket prices and scheduling. It also spells the end to a long-term relationship between the Australian carrier and British Airways.

Well-established European carriers have watched nervously as Gulf airlines have grown into formidable competitors in recent years, enticing long-haul passengers with efficient connections, relatively new planes and oftentimes better amenities.

The Air France-KLM deal could prove significant in that it shows a willingness by the company to work with a Gulf rival. It does not include Etihad taking an equity stake in the airline.

"It's relatively speaking a step forward in thinking `let's try to do something with the Gulf carriers,'" said John Strickland, director of London-based aviation consultancy firm JLS Consulting. "It's a test."

Etihad has been more aggressive than larger Gulf rivals Emirates and Qatar Airways in forging partnerships with foreign carriers. Besides the stake in Air Berlin, in recent months it has bought 40 percent of Air Seychelles, the tiny island country's national carrier, and smaller stakes in Aer Lingus of Ireland and Virgin Australia. It now has codeshares with 40 carriers.

On Sunday, Etihad reported a 19 percent jump in third-quarter sales to $1.3 billion, and said it is on track to earn its second straight annual profit this year. President and CEO James Hogan said its partnerships with other airlines have been a key element in driving passenger traffic growth, even as it continues to grow its own fleet.

Etihad, which is owned by the Abu Dhabi government, has 67 planes in its fleet and another 100 on order. It recently began flying to Lagos, Nigeria, and plans to add destinations including Washington and Sao Paulo next year.