• Home
• /
• Aviation

Etihad Airways: Spread your wings and fly

Setting up an airline is never an easy task. Making it succeed, expand and thrive is even harder — especially when the industry has seen many casualties in both good times and in the bad.

The decision to launch Etihad Airways back in 2003 was seen as a risky endeavour, if only because the airline industry was still licking its wounds from the post-September 11, 2001 attacks that hurt global air travel in a massive way.

On November 12, 2003, Etihad Airways took off on its maiden commercial flight to Beirut, with many watching to see what the future held for this newly born GCC airline. Fast forward 10 years, the airline has under its belt some 96 destinations with a fleet of 86-plus modern Airbus and Boeing airplanes that have helped the airline not just to spread its network, but to pull the world to the UAE capital of Abu Dhabi.

Many were concerned that such a big airline ambition not far from Dubai and the base of Emirates was perhaps a dangerous move, but as I have opined many a time — when you look at the GCC’s reach to over 2.5 billion people within a five to six hour flight radius from any Gulf city, then that market is hugely under-served and new entrants can exploit that demand to their advantage. And that’s exactly what Etihad is doing.

Under the stewardship of one of the most respected men in the airline business, James Hogan has taken Etihad from its humble beginnings to an airline that now has several stakes in partner airlines and has been growing at double-digit percentage rates faster than any other airline since start up.

Hogan and the Etihad team have redeveloped Abu Dhabi as a huge commercial, economic and political force to be reckoned with.

In achieving its first profit in 2011 of around $14 million, Etihad has demonstrated that despite the heavy capital outlay on services, staff and its growing fleet, the airline has managed to harness significant economies of scale to prove that it’s more than just a viable business entity. And when you consider that the UAE was amongst the first countries to be hit hard by the global financial crises, it has also become one of the first to rebound as well. And during that time, Etihad has not slowed the pace of its expansion organically.

Indeed, it redefined the growth strategy that many airlines traditionally follow and instead of going down the route of joining an alliance, or indeed, creating a grouping of its own, Etihad has taken key stakes in several other airlines dotted around the world in a bid to bolster traffic, revenue and leverage the boon of inorganic growth by helping these partner airlines to restructure their operations so that everyone can share the spoils of their commercial rejuvenation.

With stakes in airberlin, Air Serbia, Air Seychelles, Aer Lingus, Virgin Australia and most recently Jet Airways, it is clear that Etihad has an eye for investment where it sees long-term value.

No one can realistically expect Etihad to wave a magic wand over these airlines and turn round their financials overnight, but it is evident that Etihad is keen to restructure its partner airlines to bolster their international credentials and their networks.

Etihad’s passengers also benefit from codeshare deals with almost 50 other airlines too. This continued, diverse and seemingly non-stop growth has aided traffic growth at Abu Dhabi International Airport. To that end, the expected opening of the new Midfield Terminal in the summer of 2017 will boost airport capacity beyond 40 million passengers a year, the bulk of which will come from Etihad and its partner airlines.

And for the longer term, despite having orders and options for 160 further Airbus and Boeing jets, Etihad is priming its future based around the fuel efficient 787-9, for which the airline is the biggest customer with 41 airplanes on order. Etihad is also eyeing a significant order for Boeing’s new 777X family as well. All the signs point to an airline investing in the “here and now” to benefit from cost, fuel and operational savings that augment and solidify its base in order to become one of the biggest Arabian airlines.

If the last 10 years of Etihad’s existence has shown anything, it highlights that despite the economic turbulence that the GCC has sailed through, and indeed, the prevailing turmoil that still exists in countries like Libya, Syria and Egypt, it’s that Etihad is not afraid of tackling difficulties around it while still seeking out new openings in markets that frankly can always benefit from more competition.

With Europe and Asia already in its sights, the advent of fuel efficient jets like the 787-9 and 777X will allow Etihad to further make inroads in countries like the USA and Latin America, where services from the Middle East are still relatively sparse.

Etihad is a more than a risk taker. It’s an innovative creature that has evolved as the market around it has evolved. Where many airlines have failed to adapt to changing market conditions, Etihad is a great example of just how well things can go despite the challenges of an ever-competitive landscape.

(The writer is chief analyst at London-based StrategicAero Research)