Gulf carrier Etihad Airways pledged to sharpen its focus on serving Abu Dhabi after posting a $1.52bn annual loss following the failure of plans to build a global network of airline investments.
The state-owned company, which saw equity partners Air Berlin Plc and Alitalia SpA file for insolvency last year, will continue to review its route network after already abandoning eight destinations, it said yesterday. Discussions about billions of dollars in fleet commitments are also continuing.
Group chief executive officer Tony Douglas, who took over in January, said progress has been made in cutting costs, improving revenues and boosting cash flow, though the measures so far amount to “solid first steps.” The 2017 result extends losses at the main airline unit to almost $3.5bn in just two years.
Etihad is retreating from a strategy of seeking to close the gap to larger Gulf rivals Emirates of Dubai and Qatar Airways by investing in overseas carriers as a shortcut to growth. Former CEO James Hogan took stakes in a range of airlines that, while struggling, brought access to major overseas markets. The plan unravelled after the carriers continued to rack up losses and Etihad itself found margins under pressure as a falling oil price hurt Mideast travel demand.
Etihad Aviation Group chairman Mohamed Mubarak Fadhel al-Mazrouei said the goal now is for the airline “to be a key driver of Abu Dhabi’s vision to develop its tourism sector, grow commerce and strengthen links to key regional and international markets.”
The focus on more local requirements makes Etihad’s mammoth roster of plane orders potentially vulnerable. The carrier has one of the biggest backlogs in global aviation, with 98 unfilled orders at Airbus SE and 76 with Boeing Co, according to the latest monthly data from the manufacturers. The tally includes A350, 777 and 787 wide-bodies usually deployed on intercontinental routes.
Douglas said in April that Etihad would adopt a more strategic and disciplined approach to expansion, while seeking to remain a major global carrier and resist becoming a “boutique” operator.
The 2017 core airline loss narrowed from $1.95bn a year earlier as sales increased by 3.4% to $6.1bn. The earnings figure excludes one-time items and the company didn’t provide a net number as it had for 2016.
The passenger count was virtually unchanged at 18.6mn and the load factor, a measure of seat occupancy, suffered a slight decline. At the same time the capacity gain was limited to 1% as growth plans were reined in, and passenger yields in the final quarter of 2017 surged 9%, indicating an increase in fares.
Peter Baumgartner, who heads the main airline unit, said the transformation process will continue with the aim of making Etihad more agile, efficient and resilient.
The recovery at Emirates, which also saw earnings squeezed in 2016 but isn’t burdened by foreign investments, has been faster, with net income surging 67% in the year through March to 4.11bn dirhams ($1.1bn). Chairman Sheikh Ahmed bin Saeed al-Maktoum quashed talk of a merger between the UAE carriers saying last month that there’ll be “no such thing.”
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