MIAMI — Etihad Airways, the flag carrier of the United Arab Emirates, posted a net loss of $1.87 Billion on $8.36 billion in revenues in 2016.
The airline blames one-off impairment charges and fuel hedging losses weighed against a solid performance of the core airline for the massive losses.
The quickly growing airline flew a record 18.5 million passengers in 2016 and had a load factor of only 79%. Yields for the carrier fell 8% on capacity pressures and a tough global economic climate.
H.E. Mohamed Mubarak Fadhel Al Mazrouei, Chairman of the Board of the Etihad Aviation Group, said: “A culmination of factors contributed to the disappointing results for 2016. The Board and executive team have been working since last year to address the issues and challenges through a comprehensive strategic review aimed at driving improved performance across the group, which includes a full review of our airline equity partnership strategy.
“The record passenger numbers in 2016 affirm Etihad’s role as a significant economic enabler for Abu Dhabi, and our airline business continues to support Abu Dhabi’s vision to develop tourism, grow commerce and strengthen links to key regional and international markets.”
Much of Etihad’s losses can be attributed to Alitalia and Air Berlin, two airlines that Etihad has substantial holdings in. Alitalia, who is currently on the brink of shutting down, may soon be taken over by Etihad.
2016 PERFORMANCE INDICATORS OF ETIHAD AIRWAYS:
|Passenger Revenue (US$ billion)||4.9||4.9|
|Cargo Revenue (US$ billion)||0.9||1.0|
|Total Revenue (US$ billion)||8.36||9.0|
|Net (loss)/profit (US$ million)||(1,873)||103|
|Total passengers (million)||18.5||17.6|
|Revenue passenger kilometres (billion)||89.5||83.2|
|Available seat kilometres (billion)||113.9||104.8|
|Number of aircraft||119||121|
|Cargo tonnage (tonnes ‘000)||596||591|
Ray Gammell, Interim Group Chief Executive Officer, explained: “We are focused on maintaining the solid performance of our core airline business – operationally and financially – even amid difficult market headwinds. At the same time, we continue to implement changes across the group as part of the comprehensive strategic review, with a focus on improving revenues and reducing costs.
“During 2016, the airline commenced a Right Size & Shape program that generated total overhead savings of 4% through headcount reductions and other measures by the end of the year, even as capacity and total passenger number increased.
“This year is just as challenging for the global aviation industry and the ever-evolving competitive environment is likely to impact overall performance in 2017. However, our airline business remains strong and class-leading, and as an aviation group, we are in a stronger position.”
As part of Etihad’s “Right Size & Shape program,” the carrier recently cut service to San Francisco in the United States. The airline also suspended operations to Doha, Qatar as part of the ongoing conflict between Qatar and several Gulf countries.
Peter Baumgartner, Chief Executive Officer of Etihad Airways, added: “Operationally, we performed well in 2016. We maintained load factor levels even as we increased capacity. Yields were under pressure in all cabins, with Business Class impacted particularly as corporate travel policies continued to encourage flyers to downgrade to Economy.
“Our fuel hedging positions, which helped manage fuel spend during the oil price boom, yet significantly impacted our cost base last year, will taper during 2017. We are also seeing promising improvements in the contribution made by our ancillary revenue strategies, and we expect those to offset some of the yield declines.”
For Etihad, hard times may soon be behind them. In 2019, Abu Dhabi’s long awaited “Middle Terminal” will open its doors to the public. The new terminal will be a game changer for Etihad as they continue to pursue Emirates and Qatar Airways.
Currently, most Etihad aircraft must use hardstands in Abu Dhabi. The new terminal will provide Etihad with dozens of new gates that will facilitate tighter connections and more efficient passenger movement.
Later this year, Etihad plans to retire its remaining A340-500s and A340-600s as the airline takes delivery of more 787 Dreamliners. In the next two years, Etihad will take delivery of their first of 62 A350s on order. Currently, Etihad is poised to take delivery of A350 MSN: 300.