Abu Dhabi's flag-carrier is to launch economy-only flights, the airline confirmed August 5, bringing it closer to the ground occupied by budget airlines.
In a statement, Etihad said that its first "all economy" aircraft would come into service in October 2010, flying to short haul destinations.
Routes between Abu Dhabi and Alexandria, Colombo, Damascus, Doha and Calicut/Thiruvananthapuram in India will be those initially offered.
The airline says that it eventually plans to operate 10 economy-only Airbus A320 aircraft, which can carry 162 passengers through the addition of 42 seats normally occupied by premium classes.
The firm's boss, James Hogan, says that the new configuration will allow Etihad to offer a "more competitive product" in markets such as Asia, the Middle East, North Africa and the Indian Subcontinent.
Etihad, like Middle Eastern rivals Emirates and Qatar, has built a name for itself by offering high-quality long-haul services through a modern and efficient hub (Abu Dhabi), a successful approach which has grown to present a threat to established non-stop European and Asian carriers in recent years.
While an all-economy aircraft may sound like Etihad is downgrading, the airline claims that the service and product won't change - seat-back entertainment systems, hot and cold meals and a 32-inch pitch seat will be standard, for instance.
Nevertheless, the news could mean more competition for budget Middle Eastern carrier Flydubai.
It serves four of the destinations Etihad intends to serve, and the distance between their respective hubs at Abu Dhabi International and Dubai International is only around an hour's drive.