Etihad has no intention of becoming ‘boutique’ airline, says CEO
The United Arab Emirates (UAE), Abu Dhabi-based Etihad Airways intends to remain a major global carrier as it adopts a more “strategic” approach to expansion, says new CEO Tony Douglas, despite having posted record losses due to failed investments in struggling foreign airlines.
According to Douglas, who took over the reins in January 2018, the Gulf carrier still strives to be the “airline of choice” as it works on re-sizing its global business and has no intention of becoming a “boutique” operator, Bloomberg quoted him as saying on April 30, 2018.
Etihad is working on restructuring plans after posting a near $1.9 billion loss for the year of 2016, the first since the airline started making money in 2011.
The record loss, which compares with a net profit of $103 million a year earlier, came about as the carrier was hit by failed investments into struggling European airlines such as Air Serbia.
It also cost Etihad’s previous CEO James Hogan his job, as he was behind the strategy to boost rapid expansion in part by buying minority stake in other airlines.
Etihad cut its funding for Alitalia and Air Berlin (AB1) , which both filed for insolvency in 2017, and is now cusing a more “strategic” approach to expansion, says the new CEO. In his words, the new approach is “to be very disciplined, very measured”.
“What we have embraced properly is a way to develop growth in a sustainable way,” Douglas said at the Global Aerospace Summit 2018, as quoted by Bloomberg. “We will choose wisely; we will make sure that detail is well-attended to.”
The Middle Eastern carriers are seeing their growth slow down and their earnings hurt over the past few years as regional travel declined due to lower crude-oil prices and turbulences in the region weakened traffic flows to the West.
The largest of the ME3 carriers, Emirates, is also assessing its strategy after posting its first decline in annual profit in five years in May 2017, with earnings down by 82%, The Financial Times reported.
Etihad already decreased its freighter fleet and reduced capacity in some passenger destinations, including Edinburgh (UK) and Perth (Australia). An announcement for further fleet and network cuts is widely anticipated.
According to Douglas, Etihad remains a relative “adolescent” in aviation terms, and will “look to learn” from the Dubai-based Emirates, the biggest of the ME3 carriers. Perhaps it could grow out of its “adolescence” if it focused more on a business model that is built on its Abu Dhabi hub.
As both Emirates and Etihad rely heavily on transfer traffic, some industry insiders have in fact suggested a tie-up between the two Gulf carriers as possibly the best solution to Etihad’s financial and strategic struggles.
According to Douglas, Etihad is open to the prospect of closer collaboration with Emirates where there is mutual benefit. “It’s fair to say that, as two partners from the United Arab Emirates, we will continue to consider, where appropriate, what are the things that we can do together,” the CEO was quoted as saying by the UAE‘s The National.
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