Etihad will forge more codeshares to return to profitability, group CEO says

The UAE national airline Etihad Airways plans to forge new codeshare partnerships with airlines around the world as it continues an operational review to narrow losses in 2018 and bring the carrier back to profitability and sustainable growth, Etihad Aviation Group’s global chief executive, Tony Douglas said.

The move follows the “delisting” of the Etihad by the Star Alliance – one of the world’s largest airline alliances – during the International Air Transport Association’s annual conference in Sydney last month, allowing 40 members of the alliance to engage with Etihad on codeshare deals, according to Mr Douglas

"In the past, the Etihad Group was identified as being an alliance itself and, consequently, under the rules of Star Alliance, its members were not allowed to engage in collaboration with us on codeshares," Mr Douglas told The National on Tuesday.

“The fact we’ve now been identified in their eyes as a more rational airline not just going for ‘growth for growth’s sake’ but looking for sustainable growth, means they’ve deregulated us and [we] will be able to go around the Star partners to build connectivity with their networks through codeshares wherever both parties agree to do so.”

The development does not equate to Etihad joining the Star Alliance, an Etihad spokeswoman said.

The responsibility for forging new codeshare partnerships would be handed to Peter Baumgartner, the former chief executive of Etihad Airways, after the group announced on Tuesday that Mr Douglas would assume responsibility for the airline division and Mr Baumgartner would adopt a new role as his senior strategic adviser.

“Peter has a really exciting role, advising me specifically on international codeshares and alliances with other airlines,” Mr Douglas said in his first set of media interviews after taking the helm of the group six months ago.

The reshuffle is part of a bigger reorganisation of senior management announced by Etihad on Tuesday, along with a revised operating model that splits the group into seven business divisions, to position it for future growth. "Etihad Group stays in place, however we have significantly flattened that structure, simplified the way it's designed, so we get crisper accountability, are more agile, and take the cost out," Mr Douglas said.

No redundancies have been made during this restructuring, an Etihad spokesman confirmed, but they might occur as part of a wider operational review, Mr Douglas told Reuters.

The airline has sought to overhaul its business in the past two years to recover from losses of almost $2 billion (Dh7.34) in 2016. As part of the strategic review, it has backed away from a growth policy of buying minority stakes in global airlines, scrapped unprofitable routes and slashed operating costs.

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Etihad Airways looks to sustainability regarding future growth

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Etihad’s equity investments, however, in Jet Airways, Virgin Australia, Air Serbia and Air Seychelles will continue, he noted.

“They are still front-and-centre of the Etihad group and important investments and partners,” Mr Douglas said. However, 90 per cent of group revenue comes from its airline operations and “we’re going to put a lot more emphasis on point-to-point travel”.

He said talks are taking place with Abu Dhabi’s tourism department and airport authority to identify opportunities to capture a bigger slice of the point-to-point passenger market.

In June, Etihad reported narrowed annual losses to $1.52bn for 2017, a 22 per cent improvement on the previous year. Mr Douglas declined to provide forecasts for 2018 but said “a trajectory of continuous improvement is our target”.

Over the next five years, Mr Douglas wants Etihad to become the “dim sum” of aviation business, using the digital revolution to provide greater choice to customers beyond the industry-standard economy, business and first-class model.

An ongoing network review and fleet reorganisation that has seen Etihad cut unprofitable routes such as Edinburgh and San Francisco and remove “unsustainable” aircraft types such as Airbus A340s and A330 freighters will continue, he said.

However, the group also seeks to launch new routes it deems profitable, including Barcelona in November. Etihad is looking at each and every destination in its own right, Mr Douglas added.

"While restructuring was always on the cards, the changes announced on Tuesday are still layered with complexity with the seven new business units and that ultimately means more long-term oversight will be required,” Saj Ahmad, chief analyst at Strategic Aero Research, said.

“That is, however, matched up with the new management team’s capability to turn around losses, and they’ve demonstrated that already with their recent results.”