One third increase in fuel prices hamper Gulf carrier's comeback

ABU DHABI, UAE - Gulf carrier Etihad Airways has announced a narrowing of its losses, prompting a note from CEO Tony Douglas that the airline's turnaround is “on track.”

Etihad has reported a loss for calendar year 2018 of $1.28 billion. 

A near $500 million cut in costs has contributed significantly, as the airline's revenues dropped 3.2% to $5.2 billion.

One of the major challenges the Abu Dhabi-based carrier has faced is a near one third increase in fuel prices.

"We are on track but we still have an awful lot to do," Tony Douglas, chief executive of Etihad Aviation Group, said in an interview with the Abu Dhabi based dfaioly newspaper The National, published on Thursday.

"We've got a 34% improvement over the last two years since we started running our transformation programme, but we openly acknowledge that there is an awful lot to be done." 

Etihad Airways' 5-year turnaround plan was initiated in 2017. A number of unprofitable routes were cut, including the Abu Dhabi-Perth route, and flights to and from Tehran, Dallas/Fort Worth and Ho Chi Minh City. Jobs have been slimmed and plane orders rationalised.

Total costs last year were reduced by 5.5% to $6.9 billion.

Etihad, the company says, is currently working on re-designing economy class to add newer seats and upgrade the technology for its onboard entertainment system.

"What we're doing is enhancing the experience whilst getting a tighter commercial return from a yield point of view,"  Douglas said. 

The carrier will also offer "bespoke" services that will allow customers more flexibility "to choose an economy seat with extra leg-room or a business-class meal with first-class pyjamas," he said.

Etihad Airways will continue to "take decisive action" to axe unprofitable routes but also add new destinations where there is demand, he said.

Under the turnaround plan, the airline says it is working on more than 700 individual projects to reduce cost and improve revenues with a timetable for execution and a monthly review. 

"There is no substitute for that kind of discipline when you go back to basics," the Etihad CEO said.

"We would like to see this trajectory maintain itself," Mr Douglas added, noting that the aviation industry is impacted by geopolitical and economic factors beyond its control.

"I’m glad we don’t operate the 737 Maxs, but those people who do operate 737 Maxs, probably two months ago weren’t expecting it," Mr Douglas said, referring to the Boeing plane that has been grounded by more than 40 countries globally this week after it was involved in two deadly crashes within five months.

Etihad carried 17.8 million passengers in 2018, down from 18.6 million the previous year. It recorded a 76.4%load factor, which is a measure of seat occupancy, down from 78.5% in 2017.

While capacity declined 4%, yields improved due to network changes and growing market share in premium and point-to-point markets, the airline said. Etihad had 106 planes in its fleet in 2018 compared to 115 in 2017.

Mr Douglas last year said the airline is now focused on flying passengers to and from Abu Dhabi, rather than carrying globe-trotting passengers between continents. 

Etihad took delivery of 8 new aircraft including three Boeing 787-9s, four Boeing 787-10s and one Boeing 777-200 freighter last year. 

"It's about going back to basics and hopefully doing those basics well," Douglas said.

Douglas joined the airline in January 2018 from the United Kingdom’s Ministry of Defence, where he was CEO of the Defence Equipment and Support department, responsible for procuring and supporting all the equipment and services for the British Armed Forces.

In the UK, he held senior positions with airport operator BAA, and as Chief Operating Officer and Group Chief Executive designate of Laing O’Rourke. His roles under airport operator BAA included Managing Director of the Heathrow Terminal 5 project, Group Supply Chain Director, Group Technical Director, and CEO of Heathrow Airport.

Previously, Douglas held senior positions in the UAE, including as CEO of Abu Dhabi Airports Company, and as CEO of Abu Dhabi Ports Company where he was responsible for the successful delivery of Khalifa Port.