Etihad Airways posted a loss in 2018 for the third year running, it said earlier this year, blaming investment losses and challenging market conditions.

The new Air Arabia Abu Dhabi will be launched in "due course", Tony Douglas, CEO of Etihad Aviation Group, said in a statement issued by the two Emirati carriers.

"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," he added.

Etihad, which has been undergoing restructuring since late 2017, said it had narrowed its losses in 2018 to $1.28 billion, from $1.52 billion the previous year.

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Along with its 2016 losses, that adds up to total losses of $4.67 billion over three years, prompting the company to scrap dozens of orders on aircraft.

Established in 2003 by the oil-rich Gulf emirate's government, the airline has faced stiff competition from regional rivals Dubai aviation giant Emirates and Doha-based Qatar Airways.

Etihad invested heavily in carriers around the world including Alitalia, airberlin, Air Seychelles, Virgin Australia and India's Jet Airways, some of which have faced financial difficulties, causing Etihad heavy losses.

In late 2017, the company appointed Douglas, a former British defense official, as its chief executive officer and launched a five-year restructuring process.

Airlines in the Gulf have faced a double hit from oil price fluctuations and regional political tensions.

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