Airline plans to stick with dual organic and inorganic growth model
Etihad Airways ongoing restructuring, confirmed by the airline last month, could prove a prudent move, according to an aviation analyst.
They are a young airline and are still navigating through this difficult quasi-boom-bust economic reality, says Saj Ahmad, chief analyst at UK-based StrategicAero Research. It is better to make prudent moves now than make deeper, far more wide ranging cuts later.
In December last year, Etihad acknowledged an ongoing process of organisational reviews and restructuring following weeks of speculation it is cutting between 1,000 and 3,000 jobs, which is equivalent to 4 to 11 per cent of its global workforce.
Ahmad argues that if the airline did not make the adjustments, including the reduction of headcount in the current challenging environment, then people would be cynical about that as well. You cant have it both ways.
By undertaking a process of managed, controlled restructuring we are able to protect the business while at the same time continuing to invest in its future growth and progress, the statement released in December said.
Etihad, however, was less straightforward in terms of the total job reductions citing that the restructuring will also result in a measured reduction of headcount in some parts of the business.
Passenger movements at Abu Dhabi International airport, Etihads main hub, has been growing at a compounded average of 17 per cent annually since 2011, the highest across the GCC. Some experts have said that such double-digit growth experienced is hard if not impossible to sustain.
Ahmad disagrees saying Etihad has the option to defer the delivery of new aircraft if there was proof that growth is not sustainable, an option that the airline has yet to take, considering that airplane buys are the biggest capital expense next to fuel. Their dual organic and inorganic growth helped boost traffic at Abu Dhabi airport However, the influx of more airlines into Abu Dhabi as well as the wider GCC has ultimately meant a near-term rethink on capital expenditure against a backdrop of expansion while inducting new planes, says Ahmad.
Etihad has 122 in-service fleet and 178 aircraft due for delivery between 2016 and 2025, according to the October 2016 fact sheet published on its website.
|Etihad Airways annual revenue ($bn), 2006-2016|
Apart from increased competition and capacity amid weaker global economic growth, Etihad is facing challenges with Italys Alitalia and Germanys Air Berlin, in which it has minority stakes.
The airline, however, said it will stick with its equity partnership strategy despite these challenges.
Its CEO James Hogan recently told an industry gathering that the airlines equity investment strategy had an immediate impact on their revenue by allowing them to fill onward connecting flights. With the exception of the two European airlines, such investments have allowed the management of the partner airlines to transform their businesses into profitable operations, according to Hogan.
Etihad has minority stakes in five other airlines including Indias Jet Airways, Air Serbia, Air Seychelles, Virgin Australia and Etihad Regional.
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