‘Back to Basics’ for Etihad Airways
Tony Douglas was an interesting choice as CEO of Etihad. Unlike a lot of top professionals across other airlines, he comes with little commercial airline experience. However, he had worked for a number of large government-owned companies in Abu Dhabi.
His appointment was a clear signal of change in Etihad’s strategy.
In an interview given to Arabian Business, Tony Douglas addressed all major issues concerning Etihad. He was to the point, except when dealing with the questions regarding Etihad’s strategic investments.
This is the interview in a nutshell.
Financial Performance
Etihad trimmed its losses in 2018. However, the losses still stood at $1.3 billion. Tony, of course, puts a positive spin to it.
“What I would say, the trajectory is what I was teasing out, the 34 percent over the last two years. So, in one way, that gives the sense that we are making the right steps in the right direction.
“We are very open in the knowledge that we still have a lot to do… Did you get lucky, or is this a function of hard graft? If you look at the ratios in there, yields [usually calculated as revenues per passenger kilometres] increased by 4 percent – that is by taking lossmaking routes out – cost has improved by 3 percent and I’m not including a massive increase in fuel. I guess it a clichéd way of describing it: in the world where little rocket science exists these days, it is back to basics.”
If you look at Etihad’s results more closely, you will notice that without the impact of high fuel prices, Etihad’s losses could have been lower by a further $300 million. I had discussed this in an earlier post – Etihad Financial Results – A different perspective.
Strategic Investments
Tony is clear that the Hogan-era strategy of investments in other airlines is past now.
“I think what we have made quite clear is that we are not going to repeat the previous strategy, described as a quasi-alliance, where sometimes taking quite small shares in other airlines where we don’t have control.”
On being asked about the future of its investments, he doesn’t offer much insights.
“That result presentation is just Etihad and not the broader network. It is specific to Etihad.”
On this note, there has been a development at Jet Airways. The lenders to Jet Airways have taken control of the airline by converting their debt to equity. As a result, Etihad’s stake has reduced from 24% to 12%. Further, the incumbent Naresh Goyal has resigned from the board.
The latest update is that Etihad’s board will be meeting on March 31 to take a call on their future with Jet Airways.
Unbundling of Fares
Expansion
“There are additional routes where we think there is opportunity that we [can] put more on. There is no rocket science behind it. I have been involved in aviation in one way or another for over 30 years and I guess way back then the networks were probably analysed once a year kind of thing.”
“I am with the persuasion that it needs to be a daily, weekly kind of thing, the market is so dynamic. Therefore, what you are seeing, and I hope you will see going forward, is an Etihad that is far more agile with what is going on with the market.”
Clearly, someone is trying to impress upon the fact that commercial airline business isn’t too complicated.
Tony also talks about the recent $22 billion cancellation of aircraft orders.
“That was a massive turning point for us at Etihad. We have released ourselves from 100 aircraft, which we were hither contractually obligated to accept, but we were not able to consume within our fleet.”
It’s sad the arabs lack confidence in their skills that they hire whites from other countries to waste their resources. They could hire a local to do that too.
They should claw back hogan’s salary and Douglas to sign deferred compensation clause. Bulk of his salary will be paid after 7 years.
I don’t think it has anything to do with the ethnicity. Many airlines higher expatriates as CEOs.
Neither is it an issue of good strategy vs bad.
Think what Etihad and Hogan must be thinking in 2000s. An alliance led by an Arab airline – providing seamless connectivity all around the world. It would have sounded great in their heads.
Obviously, things didn’t go this way. But hindsight is always 20/20.
Yeah. That’s what I am saying. Many airlines hire expats but the expats are no better. I can come with ideas too, the CEOs need to execute as well to earn their pay.
Arabs need to hire a lot more locally and let them fail and learn instead of hiring expats and letting them fail.