In early March 2020, FlightGlobal was finalising plans to interview Tony Douglas in Abu Dhabi later that month. The Etihad Airways group chief govt was a bit of over two years into a serious restructuring after the enterprise’s ill-fated equity-alliance technique.
Specializing in the job in hand, Douglas had till that time stored a comparatively low profile – particularly by comparability to the headline-grabbing plane orders and airline offers which had marked the service’s fast rise and subsequent challenges. Nevertheless, emboldened by faster-than-expected tempo of restoration efforts, Etihad was in place to speak about progress.
By the tip of March, worldwide journey had floor to a halt and it was clear the pandemic was to ship a contemporary set of unprecedented challenges.
But regardless of the large disruption and extra cuts that had been to observe, Douglas believes the group stays on observe to fulfill its authentic goal of reaching revenue in 2023.
“In some methods we’re in all probability now forward of schedule of what was the unique plan,” Douglas tells FlightGlobal. “We’re on for 2023; I’d wish to assume it [will be] earlier in 2023 [rather] than later in it.
”I feel the EBITDA quantity specifically – to have a $1 billion swing to a constructive within the mid-$400 [millions] – is one thing that provides us confidence that we will ship on that ambition.”
He was talking on the day Etihad disclosed a lack of $476 million. This not solely marked progress on the $1.7 billion the group misplaced within the pandemic-hit 2020; considerably, it was additionally a 41% enchancment on its efficiency of 2019.
At one stage, that could be a product of a nimble response to the modified market the pandemic created. Cargo, for instance, which was largely considered because the unglamorous a part of an airline, has taken centre-stage for a lot of for the reason that disaster. Etihad is not any exception.
“Cargo has been a life-saver,” says Douglas. “Our cargo efficiency in 2021 was a 73% improve and the market not solely continued to see development in yield, but in addition in quantity, and was a really key half.”
Document cargo revenues topped $1.7 billion in 2021 and contributed greater than half the group’s $3.1 billion earnings for the yr.
Cargo elevated in significance given continued challenges within the worldwide passenger enterprise, which had been significantly acute for an operator with a restricted home market to fall again on. Passenger numbers of three.5 million had been nonetheless behind the 4.1 million Etihad flew in 2020 – and only a fifth of pre-crisis ranges.
Nevertheless, Douglas, describing the yr as “a sport of two halves”, is inspired by the enhancing pattern. The airline carried greater than two-thirds of its passengers over the second half and cargo elements climbed from the mid-20 % ranges to 70%.
Notably, circumstances supporting the journey restoration proceed to enhance. Abu Dhabi has lifted the requirement for vaccinated travellers to have a detrimental PCR check earlier than travelling – testing on arrival on the airport stays – whereas key markets in Asia-Pacific, resembling Australia, are beginning to reopen. “It has all began to normalise out a bit now,” he says.
HOW ETIHAD RESTRUCTURED
Douglas believes one of many causes the group has weathered the pandemic in addition to it has is that restructuring started lengthy earlier than Covid-19.
That restructuring was obligatory after an bold quai-alliance technique, designed to fast-track community development for the youngest of the massive Gulf carriers, hit the buffers in 2017 as losses spiralled at Air Berlin and Alitalia, and Etihad retrenched amid its personal heavy losses.
That was the purpose at which Douglas, the previous London Heathrow and Abu Dhabi airports chief govt, took the helm of Etihad.
“The implications of that had been twofold,” Douglas explains. “One was the direct liabilities that got here from sizeable failings in several jurisdictions. But in addition then future liabilities as a consequence of getting 155 plane on order, assuming that this quasi-alliance was going to develop at a charge that might justify it. And naturally, a failed technique then presents a steadiness sheet that was in determined bother and unimaginable to service itself.
“To not be overly-melodramatic, [but this was] actually open coronary heart surgical procedure on the steadiness sheet, and a realisation that given the scale of the publicity, this wasn’t ’take two Panadol and the headache will go away’,” he provides. “That is going to take a while, many steps to get one from what was a course of development [through the alliance strategy] to one thing that may genuinely self-sustain itself.”
The service’s restructuring included a serious simplification of the enterprise. Out went the a number of airline investments, as did a major variety of long-haul plane on order and a string of unprofitable routes. A simplified organisational construction, below which Douglas took duty for the core airline, was put in place.
The pandemic introduced additional want for structural modifications, because the airline positioned itself for the brand new stage of demand possible within the post-Covid journey atmosphere.
On the finish of final yr, plans had been introduced for the divestment of Etihad’s aviation help service models, together with its engineering division, to Abu Dhabi holding firm ADQ, additional illustrating a transparent technique to concentrate on Etihad’s core airline operations.
“We’re now not attempting to develop for rising’s sake. Massive just isn’t lovely by definition,” says Douglas. “We in all probability under-invested into the core Etihad model, as a result of getting your self consumed in one thing like Alitalia can very quickly grow to be a drain upon anyone, even with important sources. So it took fairly a little bit of time, clearly, to cope with the implications. However equally, what we’ve acquired now could be a wholehearted focus upon the core Etihad model.
“The mandate is what it at all times was.” he provides. “It’s taking Abu Dhabi to the world and bringing the world to Abu Dhabi. We’re proudly the nationwide service. And I feel you’ll see a much more concentrated effort in that regard now [compared] to maybe up to now, once we had been unfold so much thinner, over many different manufacturers related to attempting to attach our quasi-alliance.”
Douglas has coined the time period “mid-size service” to explain the airline’s new mannequin. “What now we have outlined as a mid-sized service is one which’s acquired an obsessional consideration to element in terms of customer support. One which’s acquired a basic basis round its environmental efficiency. However might be a fleet measurement – at present we’re working [67] plane – that can proceed to develop because the market requires.
“However what we’re not going to attempt to do is artificially stimulate by rising sooner than the market. What we aren’t going to attempt to do is simply go to head-to-head on worth wars to steal it off any individual else – ie, purchase into European airways or Indian airways. We’ll attempt to align it extra to the basics of what Abu Dhabi as our dwelling Emirate requires, and develop it sustainability off the again of that.”
ALIGNING FLEET REQUIREMENTS
Maybe essentially the most tangible signal of the brand new mid-size service is thru its fleet – and its subsequent growth plans.
Etihad’s fleet stood at over 100 plane earlier than the disaster. Nevertheless, even earlier than the pandemic hit, it had taken steps to cut back variety of plane sorts it operated and incoming plane on order.
“Beforehand, folks may have nearly jokingly mentioned that we had been the delight of your common plane spotter, since you may have stood on the finish of the runways that we operated from and actually flip over the pages and tick them off. And I feel everyone knows that there’s a sizeable inefficiency and the associated fee that goes with that, when it comes to a number of fleet sorts. And we had been dedicated to a number of fleet sorts for all method of legacy causes. And that simply takes time to iron out.
“And in so doing lots of the efficiency advantages of final yr, fairly frankly, had been a perform of not having an intensive and over-extended fleet combine, however taking the operational efficiencies of 787s, specifically.”
Etihad has 39 Dreamliners within the fleet – and an additional 32 on order – and the kind would be the spine of the widebody fleet together with the Airbus A350-1000s which is able to enter service shortly. Nevertheless, the service’s commitments for the latter have additionally been pared again.
“We’re in for 12,” says Douglas. “And the primary 5 are progressively coming into into service from this yr. The primary three, for positive.
“We’re actually enthusiastic about bringing the A350 into the line-up because the second horse within the steady. And when it does have its huge reveal, I feel the product providing that one will see is sort of distinctive. However it does so in a approach the place it’s not on the expense of price.”
The service although has exited its Airbus A330 and A340 operations, and bought its Boeing 777s – although leased some again.
Gone too, possible eternally, are Etihad’s 10 A380s, which had been grounded two years in the past when the pandemic hit. “We don’t see them re-entering into our fleet planning until the yield on the ticket worth and the demand may ever make them financially viable. Now with $100 oil worth that’s unlikely to happen any time quickly/if ever.
“The A380 is an unbelievable product. It’s one thing that each one of us love from a travelling perspective. However the economics of it commercially don’t work,” he says.
Etihad retains a dedication for 777-9s, although Boeing’s certification challenges of the kind makes supply timelines unsure.
“It provides us the pliability to develop as and when our market drives that. However equally, what we’re now not into is an entire sequence of deliveries which are going to present us indigestion, that by definition, are going to set us again once more, as a result of we’ve acquired a fleet greater than we will really maintain or warrant.”
Etihad although has not utterly misplaced is urge for food for brand spanking new plane. Throughout the latest Singapore Airshow it disclosed a letter of intent for seven of the not too long ago launched A350 Freighter.
“We’re speaking a few programme that profitable supply of is prone to happen on the level when our 777 freighters attain a pure retirement.
”There’s in all probability an expectation, that over the following decade specifically, there’ll be much more problem round the price of air freight and the carbon implications thereof,” he says, suggesting it might solely be a “matter of time” earlier than regulators take a look at punitive measures like taxation to hurry change on this sector. “What the options are prone to be, is, in our opinion, A350 freighters, and that’s the explanation why strategically we went in. ”
SETTING SUSTAINABLE TARGETS
Alongside working efficiencies, Douglas see the 787s and A350s serving to to drive growth of a extra sustainable future.
“These two… are our poster kids which are on the market intentionally giving good proof as to what we’re attempting to do in a collaborative method to transfer the sustainability agenda ahead.”
At November’s Dubai air present Etihad struck an settlement with Airbus to collaborate on sustainability efforts below a programme that can use A350-1000 jets within the type of the service’s ’Greenliner’ initiative with Boeing. Etihad teamed with Boeing two years earlier to make use of a 787-9 as a testbed for sustainability initiatives.
That resulted in an October flight final yr between Abu Dhabi and London Heathrow the place carbon emissions had been reduce 72% over an Etihad equal flight in 2019.
That partially was as a result of it was operated with a extra fuel-efficient 787 fairly than an A380. It additionally flew with a 38% mixture of sustainable aviation gasoline – although that it was in need of its 50% goal illustrates the continued challenges the business faces in sourcing sufficient SAF. Optimising route planning, together with components resembling a steady descent, introduced additional financial savings.
“Now, the apparent punchline is sustainable aviation gasoline just isn’t repeatable regularly [today]. And the optimum route planning isn’t repeatable,” he says. “However it’s intentionally supposed to attract a better appreciation to the function of governments and coverage setters and regulators, as a result of with out which, that can at all times be a handicap.”
Douglas sees SAF as a key enabler to reaching its emissions targets. “It will likely be one of many huge methods through which we will get, definitely to the step by 2035, which is a 50% discount in carbon emissions, and a giant bounce in the direction of the ultimate goal, which in fact, is 100% carbon discount.”
The theme of sustainability punctuates Douglas’ solutions and a raft of initiatives over the previous two years level to the best way Etihad is embedding this throughout completely different facets of its enterprise.
That features eye-catching initiatives starting from a $1.2 billion financing tied to environmental, social and governance targets to a not too long ago launched ’inexperienced loyalty’ programme for corporates providing rewards and incentives designed to help environmental initiatives.
This ties in with analysis Douglas says the airline has finished which reveals the differing priorities passengers have for air journey.
“What comes out of it loud and clear is the youthful populace, not surprisingly, are much more aware in regards to the sustainability issues and the carbon footprint on account of travelling. Now, with that in thoughts, [the question is] how do you get engagement with individuals who have gotten a aware alternative to have the ability to select one thing that’s extra prone to contribute to the best way ahead.”
Are such measures sufficient to sort out the difficulty? “Blunt reply, sadly, it’s nearly definitely not sufficient. And I feel everyone’s acutely conscious, there isn’t any silver bullet to this,” Douglas says, noting that whereas he hopes the pandemic could also be drawing in the direction of an finish, he’s conscious greater challenges stay.
“The sustainability problem to business aviation goes to be round for many years, if not generations. It’s a perform of the physics of flight and the truth that there’s a continued demand for folks to need to have the ability to accomplish that,” he says. ”So now we have to go about it differently.”