Etihad Airways and Air Arabia plan to launch a low-cost carrier operating out of Abu Dhabi.

The airlines say they want to serve “growing demand for budget travel from the United Arab Emirates’ capital”.

The new airline will be called ‘Air Arabia Abu Dhabi’ and serve regional routes out of Abu Dhabi International, where Etihad is based.

Low-cost carrier Air Arabia is based at Sharjah International Airport in the UAE. It is a public company listed on the Dubai Financial Market, and its subsidiaries include Air Arabia Maroc and Air Arabia Egypt.

The airlines said more information about the new venture would be made available soon.

Etihad reported a loss of just under US$1.3 billion for its core airline operations in 2018, a slight improvement on 2017, when it lost $1.52 billion.

According to Reuters, Air Arabia Abu Dhabi will be Etihad’s first investment in another airline since its ‘equity alliance’ strategy, which once saw it hold stakes in as many as eight other carriers, unravelled.

It owned a 24 per cent stake in Jet Airways, which went bankrupt earlier this year, and a 29 per cent stake in Air Berlin, which folded in 2017.

Etihad is in the middle of a five-year ‘transformation programme’ that aims to make it profitable, which has seen aircraft order cancellations, the removal of premium chauffeur drive services at international destinations, the introduction of buy-on-board choicesthe launch of a new Economy Space seating option, and the outsourcing of selected lounges to No1 Lounges.

In 2018 it discontinued unprofitable routes including Tehran, Jaipur, Entebbe, Dallas Fort Worth, Ho Chi Minh City, Dhaka, Dar es Salaam, Edinburgh and Perth.

Executives recently said they are now aiming for profitability by 2023.

Fellow UAE carrier Emirates has a close cooperation with Flydubai, with both airlines owned by the Dubai government. Flydubai was founded as a low-cost regional airline, though its route map now extends to Europe, Africa and Asia, and it offers a business class product.,