Etihad Posts $1.87 Billion Loss

[kamchatsky]

This is not good for Etihad at all ..... Maybe EY and EK will get married?

Wonder how it will affect VA:

https://www.bloomberg.com/news/arti...-billion-loss-in-worst-blow-for-gulf-carriers

_____________________________________________________________________________________

• Abu Dhabi-based carrier hurt by low oil price, equity alliance
  
• Dubai rival Emirates posted first profit drop for five years

Etihad Airways posted a $1.87 billion annual loss, revealing the full extent of the pressures facing Persian Gulf carriers as they grapple with the impact of terrorism on global traffic flows and a low oil price that’s crimped local travel.
The 2016 loss came after Abu Dhabi-based Etihad booked a $1.06 billion charge from writing down the value of aircraft and a further $808 million hit from the reduced value of stakes in so called equity partners including struggling Air Berlin Plc and Italy’s Alitalia SpA, which filed for bankruptcy in May.
[FONT=BWHaasHead-75Bold, Helvetica, Arial, sans-serif](see link for rest of article)[/FONT]

 

[Mattg]

Not a good result at all for EY. No doubt some of its failing investments (I'm looking at AZ and AB) have not helped.

Does anyone else find it strange that Etihad was hurt by the low oil price? I thought most airlines benefited from low oil prices...

 

[Daver6]

I though the same thing about the oil price.

Also interesting they mention people flying Y instead of J. I'd imagine this is where not having Y+ would hurt an airline.

 

[Strategic Aviation]

Etihad Lost Nearly $2 Billion Last Year - Yet They Made Money Flying Passengers - View from the Wing

Peeling back the onion on Etihad’s financial performance they took a charge of $1.06 billion for phasing out aircraft and lower values of remaining planes; an $808 million charge due to hits they’ve taken on foreign airline investments including Alitalia and air berlin; and they took losses on fuel hedges.

Many people would be surprised that Etihad was hedging fuel costs, not just receiving free fuel from the government like Delta wants you to believe.

The airline reported that business class yields have suffered as companies have traded down to economy fares for employee travel.

Of course 2016 performance was before the US travel ban and the electronics ban which would have diminished financial performance on their US routes, so 2017 will suffer additional drag (in addition to continued losses from Alitalia and air berlin) though the US is a very small portion of their route network.

 

[OzEire]

This is not good for Etihad at all ....Etihad Airways posted a $1.87 billion annual loss, revealing the full extent of the pressures facing Persian Gulf carriers as they grapple with the impact of terrorism on global traffic flows and a low oil price...

Why do these articles always ignore the obvious? EY has horrible customer service and treats pax with utter disdain. It's hard to maintain a profit when former pax tell all of their friends to avoid the airline.

The policies and reputation of the transit country aren't the best either. No one is surprised that Kam Air or Air Koryo struggle but they don't blame "low oil prices".

 

[mannej]

Why do these articles always ignore the obvious? EY has horrible customer service and treats pax with utter disdain. It's hard to maintain a profit when former pax tell all of their friends to avoid the airline.

The policies and reputation of the transit country aren't the best either. No one is surprised that Kam Air or Air Koryo struggle but they don't blame "low oil prices".

Customer service is subjective, and the I'm telling my friends is something all airlines deal with, so minor in the scheme of things.

Hedging oil prices is a risk based strategy and can backfire. Cathay has had issues with hedging a number of times over the last 10 years or so. It can be a fairly big hit if you get the hedge wrong.

 

[Melburnian1]

I also wonder 'how long before they want out of VA' even though the losses of Air Berlin are if I recall larger than VA's.

Presumably EY has in part been hit by a low oil price meaning reduced revenue for Gulf states, and in turn lower business travel by the locals (and perhaps declining leisure travel as well by locals.)

If we we were betting men and women, we'd have to suggest that while the amounts may vary, QR must also be adversely affected, and that's without factoring in the growing dispute between Qatar and its neighbours.

 

[Strategic Aviation]

Etihad's Cuts Continue, Go Even Deeper With Lounge Spa Closure - View from the Wing

Etihad’s situation is even worse, they’ve lost billions in a strategy to diversify their business around the world, investing in airlines that could drive addition traffic through their Abu Dhabi hub. Alitalia and air berlin were disastrous investments and both carriers are insolvent. They’ve sold off their stake in Darwin Airlines (which had been rebranded Etihad Regional). And they’ve lost much of their influence over Jet Airways to Delta.

Etihad pushed out their CEO amidst the mounting problems in their European airline investments. We’ve also seen layoffs at the airline.

They fly just 6 daily flights to the U.S., having cut their San Francisco service. They cut their car service for premium cabin passengers and are monetizing seat selection.

Now they’re even closing the spa in their First and Business Class Lounge at London Heathrow at the end of the month.

Naturally they spin this as a positive, “we will soon be introducing more areas for you to relax, as well as some new food and drink options” of course more areas to relax means space in which we used to have a spa you’ll be able to just sit in.

 

[Duffa]

Billions of losses despite all the subsidies from Govt. You can expand as much as you like but if you don't have the product then customers will vote with their feet.

 

[rock86]

Billions of losses despite all the subsidies from Govt. You can expand as much as you like but if you don't have the product then customers will vote with their feet.

Do the ME3 governments really care about the current losses posted by their airlines though? The airlines are only one part of their ongoing plan, their oil is finite & they don't have as vast reserves as some other states (also if the current trend continues oil may not be a vital fuel source sought in the next few decades). So, these few Arab states have made no secret about them becoming the major international transport (and logistics) hubs going forward. So, if they're seeing growth in the wider economy and they believe signs are still positive, then airline losses will be taken with a grain of salt and they'll continue to pour money into them to continue the plan.

 

[moa999]

Agreed it's not all about the airline. They need the airline to support the large airport investment and hotels, tourist destination etc.
When one group owns the lot and benefits from increased GDP it's easy to cross-subsidy

But with lower fuel prices the Arab states aren't rolling in quite the same money, so some of these investments will need to stand on their own

 

[Strategic Aviation]

Do the ME3 governments really care about the current losses posted by their airlines though?

The ongoing 'enhancements' strongly suggest that.

In and of itself this might seem minor, but it reflects a major trend we’re seeing from the Gulf carriers. Clearly they’re forecasting weaker global demand for air travel, while also being under immense financial pressure from their respective governments. For years the “big three” Gulf carriers were run primarily with the purpose of bringing people to the UAE and Qatar, with financial performance being of secondary importance.

However, it seems the Gulf carriers are largely being cut off by their governments. So I suspect we’ll continue to see huge cuts across the board — just lately we’ve seen Emirates start charging for many economy seat assignments, Etihad lose patience with their equity partners, and Qatar making significant cuts to their soft product.

To go hand-in-hand with Emirates delaying delivery of A380s, they also recently fired many of their cabin crew recruiters, which shows that their growth will substantially be slowing down.

Expect a lot more changes over the coming years, this is just the beginning. I wouldn’t be surprised to see further significant delays in aircraft delivery.

 

[rock86]

Agreed it's not all about the airline. They need the airline to support the large airport investment and hotels, tourist destination etc.
When one group owns the lot and benefits from increased GDP it's easy to cross-subsidy

But with lower fuel prices the Arab states aren't rolling in quite the same money, so some of these investments will need to stand on their own

And I don't disagree with the above posts. But I just can't see the governments cutting off the airlines subsidies provided, as they're just way too far into the strategy they've implemented & with no flagship carriers means no end goal achievable (a much bigger disaster then a few billion losses).

 

[spudseamus]

" you are only as good as your last flight" Business class in Lufthansa/ nope, BA/ nope , Singapore/ok , Thai / nope , Etihad / yes and giving them another go next month .

 

[Strategic Aviation]

But I just can't see the governments cutting off the airlines subsidies provided, as they're just way too far into the strategy they've implemented

Cutting off entirely, probably not. But it would appear that deep cuts have already been made, with significant impacts, and that more can probably be expected.

The transport hub strategy is potentially at risk from point-to-point travel bypassing hubs, political instability like the nonsense with Qatar, and of course cost. It will be interesting to see whether they can sustain the strategy long term in a financially disciplined way.

If the strategy was too big to fail/their last great hope, I would have actually expected to see them sink more money into it rather than cutting back. Like some of MH's decisions (e.g. triple daily Australian frequencies) not long before the unavoidable reality hit home.

 

[Strategic Aviation]

Etihad’s Abu Dhabi hub more partners stop service, shifting Etihad’s outlook to a boutique airline - CAPA Centre For Aviation

Premium article so only the below content is available without a subscription:-

Etihad and its Abu Dhabi hub are shifting from an expansive network involving multiple partners to a smaller footprint centred around Etihad. 2017 is witnessing an exodus from Abu Dhabi of Etihad's equity partners. Air Berlin, Air Serbia, Niki and Virgin Australia have all ended Abu Dhabi flights. Air Seychelles has reduced capacity.

Jet Airways, the largest partner in Abu Dhabi, is reducing its presence as it favours a new partnership with Air France-KLM and Delta, and shifts its flying from Abu Dhabi to Amsterdam and Paris. Jet Airways is scaling back Abu Dhabi service from secondary Indian cities, the market the Abu Dhabi hub was right for.

Etihad has more work ahead of it as it unwinds its partnership strategy and receives a new CEO, but it is evident the future Etihad will be more boutique and have to rely more on itself as its strategy is refocused.

 

[Strategic Aviation]

More cost-cutting:-

Etihad Downgrades Their Business Class Champagne - One Mile at a Time

It’s sort of unbelievable the degree to which Etihad has been cost cutting lately. I can’t think of another airline that has made cuts to their experience as frequently and severely as Etihad has, as they’re trying to cost cut their way to profitability.

Just looking at their business class experience, they’ve eliminated chauffeur service outside the UAE, cut pajamas, raised the cost of wifi, eliminated free spa treatments, cut a la carte dining and specialty coughtails in the lounges, and that’s only the beginning. Well, Etihad has just quietly made their latest cut to the business class experience.

Etihad has changed their longhaul business class champagne from Billecart-Salmon Brut to Piper-Heidsieck Brut. Piper-Heidsieck isn’t a bad (or cheap) champagne, though I think most would agree that Billecart-Salmon is better.

And revenue experiments:-

Etihad Introduces 60-Month Payment Plans (Including For The Residence) - One Mile at a Time

The Telegraph writes about how Etihad has introduced payment plans for their flights, which allows customers to pay for their ticket over five years. This is something that’s facilitated by PayFort, and as of now is only available to those in the UAE, Saudi Arabia, and Egypt. Now, I can see value in this for someone who doesn’t have a lot of money and wants to finance an economy ticket to visit their family, but an Etihad executive is suggesting this could be just as useful if wanting to fly The Residence:

Etihad Testing Hand Baggage Only Fares - View from the Wing

Etihad is taking the next step towards becoming a no frills carrier like British Airways. They’re testing Hand Baggage Only fares.

They give away the plot, though, explaining that this is all about “diversify[ing] its revenues in line with digital capabilities” and is a part of their overall efforts at “new ancillary products including extra legroom seats, neighbour-free seats and preferred seating.”

Etihad expects that this will be “the first of many trials the airline plans to initiate over coming months…” Their customers can’t wait.

 

[UP4014]

Not a good result at all for EY. No doubt some of its failing investments (I'm looking at AZ and AB) have not helped.

Does anyone else find it strange that Etihad was hurt by the low oil price? I thought most airlines benefited from low oil prices...

Just a guess, perhaps their Gulf customers need the income generated by oil to buy tickets.

 

[Strategic Aviation]

Does anyone else find it strange that Etihad was hurt by the low oil price? I thought most airlines benefited from low oil prices...

Just a guess, perhaps their Gulf customers need the income generated by oil to buy tickets.

It was due to hedging the price of fuel as quoted above.

Peeling back the onion on Etihad’s financial performance they took a charge of $1.06 billion for phasing out aircraft and lower values of remaining planes; an $808 million charge due to hits they’ve taken on foreign airline investments including Alitalia and air berlin; and they took losses on fuel hedges.

Many people would be surprised that Etihad was hedging fuel costs, not just receiving free fuel from the government like Delta wants you to believe.

 

[UP4014]

It was due to hedging the price of fuel as quoted above.

Yes but didn't it also say lower J loads and increased Y loads.