Etihad Airways profit jumps 48% to Dh227.5m

Etihad Airways on Monday announced that its 2013 net profit jumped 48 per cent to $62 million (Dh227.54 million) while revenues rose 27 per cent to $6.1 billion (Dh22.38 billion).

The record performance also saw earnings before interest and tax (EBIT) up 22 per cent to $208 million and earnings before interest, tax, depreciation, amortisation and rentals (EBITDAR) up 30 per cent to $979 million, a margin of 16 per cent of total revenues.

This marked the third successive year of net profitability, in the airline’s tenth year of operation.

James Hogan, President and Chief Executive Officer of Etihad Airways, said: “This is another important step forward in our journey as a growing, commercially successful business.  We have hit every financial target for each of the last seven years, bringing sustainable profitability to a business which has grown from just $300 million in revenues in 2005 to more than $6 billion today.

“We are particularly pleased to deliver a return for our shareholder, while also playing a major role in the development of trade and tourism within the emirate of Abu Dhabi.”

Passenger numbers were up 12 per cent 11.5 million.

Revenue Passenger Kilometres (RPKs) – measuring passenger journeys - increased by 16 per cent to 55.5 billion (47.7 billion), while Available Seat Kilometres (ASKs) – representing capacity - grew by 17 per cent to 71.1 billion (61 billion).

These figures reflected strong growth in passenger traffic volumes, in a year when Etihad Airways added six new destinations – Washington DC, Amsterdam, Sao Paulo, Belgrade, Ho Chi Minh City and Sana’a - and increased capacity on 18 existing routes. At year’s end, the average network-wide seat load factor was 78 per cent, unchanged from 2012.

The airline has announced nine new destinations for 2014 – the US cities of Los Angeles and Dallas-Fort Worth, the European gateways of Rome and Zurich, Jaipur in India, Perth in Western Australia, Phuket in Thailand, Medina in Saudi Arabia and Yerevan in Armenia.

A key driver of Etihad Airways’ growth in 2013 was its partnership strategy, based on wide-ranging codeshares and its unique approach of minority equity investments in strategically important airlines. This has accelerated network growth, giving it the largest route network of any Middle Eastern carrier, reaching almost 400 destinations; boosted sales and marketing opportunities in key markets around the world; and allowed significant business synergies and cost savings.

This strategy delivered revenues of $820 million in 2013, up 30 per cent ($629 million), and represented 21 per cent of total passenger revenues for Etihad Airways.

Hogan said: “Our codeshare partnerships have been an important part of our business performance for the last seven years.  But it is our equity investments which are really taking off now, allowing us to build integrated networks and schedules, develop common products and services and most importantly, identify business and cost synergies. These synergies are outstanding.  Our joint purchasing taskforces are delivering real and significant savings across all equity alliance members, giving each of us real competitive advantage through lower unit costs.”

In addition to its four existing equity partners – airberlin, Air Seychelles, Virgin Australia and Aer Lingus -  Etihad Airways announced investments in three additional carriers in 2013.

Etihad Airways’ cargo division delivered a standout performance in a stagnant air freight market, with cargo revenues up 30 per cent to $928 million ($716 million) on volumes up from 367,837 to 486,753 tonnes.

“This shows what focused business strategy can deliver,” said Hogan.  “We have identified cargo as a major growth opportunity for Etihad Airways and its partners, and this will be a billion dollar business in 2014.”

In accordance with its shareholder mandate to operate as a fully commercial entity, Etihad Airways continued to build its portfolio of financing partners, increasing from 60 in 2012 to more than 70 in 2013.  The airline raised $2.14 billion on the commercial markets in 2013, bringing its total to almost $9 billion, primarily for fleet development.

Etihad Airways also continued to strengthen its risk management through active hedging against major variables including foreign exchange, interest rates, jet fuel prices and carbon emission pricing.

“These financial institutions invest in Etihad Airways because they understand our business model and the journey we are on.  They recognise a business which grows organically and through acquisition, invests in long-term infrastructure and business development, and identifies and mitigates risk across all areas,” said Hogan.

In 2013, the airline received 16 passenger jets, of which 11 were new aircraft – six wide-bodied Boeing 777-300ERs, four narrow-bodied Airbus A320-200s and the airline’s first Airbus A321.

There were also five wide-bodied Airbus A330-200s obtained from Jet Airways, three of them leased and two purchased.

Etihad Cargo added three new freighters – two Boeing 777-200Fs and one Airbus A330-200F. It also “wet leased” a Boeing 747-400ERF from KLM Royal Dutch Airlines, and a Boeing 747-8F from US operator Atlas Air to replace two older aircraft.

Outlook

In 2014, Etihad Airways plans to introduce 18 new aircraft, including its first Boeing 787-9 Dreamliner and Airbus A380 super jumbo, both of which are scheduled for delivery in the fourth quarter. The airline also concluded late in December an agreement to acquire five Boeing 777-200LR jets from Air India to help accelerate network growth.

In addition to new aircraft to accommodate traffic growth, Etihad Airways continued to invest heavily in new product during 2013, with initiatives including luxurious new airport lounges in Washington DC and Paris, new Business Class and First Class lounges in Abu Dhabi, and the commencement of a program to introduce on-board Wi-Fi, mobile phone connectivity and live television on board.

The airline also launched its Flying Nanny service, introducing more than 750 cabin crew members who have been specially trained to assist families travelling with young children.

A further measure of the airline’s growth was the increased membership of the Etihad Guest loyalty program. In 2013, membership numbers increased from 1.9 million to 2.3 million, up 21 per cent, representing an average increase of 1,100 new members per day.

At the close of 2013, Etihad Airways employed 13,535 employees in the core airline business, an increase of 27 per cent over the 10,656 in 2012. Including the new Etihad Airport Services subsidiary, the group employed a total of 17,603 people from 142 nationalities.

Of this number, the core airline employs 1,468 UAE nationals, 17 per cent more than 2012. The Etihad Airways Emiratisation program includes schemes for cadet pilots, engineers and graduate managers, in sales and at airports.

“Against a difficult economic and geopolitical environment, and fierce competition in key markets including the Middle East, Europe, Asia, Australia and the Americas, the 2013 results mark an outstanding performance,” said Hogan.

“The global market remains challenging in 2014 but the macroeconomic picture is improving in key economies around the world.  We believe our new model, and the investments we have made in product, service and infrastructure, mean that Etihad Airways is positioned strongly for top-line growth and bottom-line delivery.”

James Hogan to head new Etihad Aviation Group

Etihad Airways today also announced the next step in its long-term business strategy, with the creation of the Etihad Aviation Group, a new structure marking the transition from a single entity airline to a wider global aviation group.

The new Etihad Aviation Group structure, headed by James Hogan as Group President and Chief Executive Officer, distinguishes the functions relating purely to Etihad Airways and those required to interface with and support the growth and success of its subsidiaries, joint venture companies and equity partners.

Group President and Chief Executive Officer James Hogan said: “Ten years ago we started life as a small regional carrier, but with global ambitions. Since then we have grown to become one of the world’s leading passenger and cargo airlines, and have expanded and diversified our operations outside the core airline business laying the foundations to become one of the leading aviation and travel groups in the world.

“It is important that this exciting new approach and philosophy is reflected in the way we organise ourselves. The new Etihad Aviation Group structure reflects this diversification and is a natural development to deliver continued and sustainable success for Etihad Airways and its partners.”

A new position of Chief Operating Officer Etihad Airways has been created to oversee the day-to-day running of the core airline. Recruitment for this position is ongoing and the successful candidate will oversee the major areas of Marketing, Sales, Operations, Technical, Cargo, Flight Operations, Guest Services, Guest Experience, and Safety and Quality.

In addition to the core airline, the Etihad Aviation Group also includes a division to coordinate and manage Etihad’s investment in its equity airline partners, and a new role of Chief Operating Officer Equity Partners will be created within the new structure to ensure an ongoing interface between the airline and its equity partners.

The position will be responsible for leading the identification and realisation of synergy benefits across the equity alliance, as well as having direct responsibility for Air Seychelles and Air Serbia in which Etihad Airways has a management responsibility. Recruitment for this position is ongoing.

A key element in the new structure is the establishment of the Hala Group, led by Chief Operating Officer Hala Group, Peter Baumgartner, formerly Chief Commercial Officer Etihad Airways. The Hala Group has been formed recognising the airline’s commercial opportunities which have grown beyond air travel across a variety of travel and hospitality businesses.

The Hala Group will bring businesses together to drive commercial value for Etihad Airways, for Abu Dhabi and for the airline’s equity alliance partners. It combines travel management provided by Hala Travel Management, destination management services of Hala Abu Dhabi, the internationally expanding wholesale and tour operating business, Etihad Holidays, and other major start-up initiatives such as a new global loyalty company.

Functions providing support to the wider Etihad Aviation Group will continue to be led by James Rigney as Group Chief Financial Officer, Ray Gammell as Group Chief People and Performance Officer, and Kevin Knight as Group Chief Strategy and Planning Officer. There will also be a new position of Group Chief Technology Officer for which recruitment is also ongoing.

Hogan added: “These are very exciting developments for our business and the strong team we have created in our new structure will greatly enhance and improve the way we work in harmony with our partner airlines and subsidiaries.

“It will ensure that we work more closely than ever before to maximise the tremendous opportunities and deliver a sustainably profitable future for Etihad Airways and wider Etihad Aviation Group members, while ensuring we meet ambitious targets relating to revenue, cost, and synergy benefits.”

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