Etihad Airways halves first-half loss as cargo revenue lifts business

The airline’s revenue from the cargo business rose 56% to $800m

Etihad Airways halved its operating losses during the first six months of 2021, despite a slower-than-expected recovery in global air travel. Courtesy Etihad Airways

Etihad Airways is on track to become a “sustainable and profitable” business after halving its operating loss in the first six months of 2021 as it reduced costs and expanded its network and cargo business, even as Covid-19 variants hamper a recovery in global air travel, its chief executive said.

The airline's cargo revenue jumped 56 per cent year on year in the first half of 2021 to $800 million as it carried 365.5 tonnes of freight, an increase of 44 per cent from the same period a year ago, the carrier said on Tuesday.

“Every day, Etihad Airways is making up for lost ground," said Tony Douglas, chief executive of Etihad Aviation Group. "Despite the curveball of the Delta variant disrupting the global recovery in air travel, we have continued to ramp up operations and are today in a much better place than this time in 2020."

Air freight has been a rare bright spot for the global aviation industry during the Covid-19 pandemic that has forced airlines to ground their fleet, lay off staff and seek government bailouts.

Cargo revenue has been a lifeline for many airlines globally facing travel restrictions and more contagious variants of the virus that have affected international passenger traffic.

Global demand for air cargo grew by 8 per cent in the first half of 2021, above pre-crisis levels, making it the strongest half-year growth since 2017 when the industry posted 10.2 per cent year-on-year growth, according to the airline lobby group International Air Transport Association.

“While market demand has been slower to recover than anticipated, our record cargo performance has continued to buoy the business," said Adam Boukadida, Etihad's chief financial officer.

The Abu Dhabi airline narrowed its core operating loss in the first half of its fiscal year to $400m, down from about $800m in the same period last year on the back of lower operating costs and strong cargo performance.

Operating revenue stood at $1.2bn, down from $1.7bn in the first half of 2020.

The state-owned airline, which is executing a five-year turnaround plan, slashed operating costs by 27 per cent year on year to $1.4bn.

Reduced capacity and volume-related expenses helped to cut operating costs, it said. Fixed overheads fell by 22 per cent year on year to $300m while finance costs were down 22 per cent due to "an ongoing balance sheet deleveraging", Etihad Airways said.

"As a result, the airline managed to rebuild its liquidity position to pre-pandemic levels," it said.

The airline's earnings before interest, taxes, depreciation, and amortisation, or Ebitda, were $100m in the first half of 2021, compared with an Ebitda loss of $100m in the same period last year.

However, passenger traffic fell by 66.6 per cent due to the Covid-19 pandemic. The airline carried 1 million passengers in the January to June period, fewer than the 3 million passengers it carried in the first half of 2020.

Seat load factors – a measure of how well the airline fills available seats – fell to 24.9 per cent during the period, from 71 per cent a year ago.

Passenger revenue fell by 68 per cent year on year to $300m as a result of new coronavirus variants affecting key travel markets on the Indian subcontinent and in Europe, the airline said.

This decrease was offset by a "strong performance in cargo operations", Etihad Airways said. To boost its cargo capacity, Etihad temporarily modified five Boeing 777 aircraft and operated more than 430 charter and scheduled cargo flights with the new configuration.

Overall, the airline expanded its operations during the first half of 2021, operating about 3,500 flights a month to 67 passenger and cargo destinations by the end of June, it said.

Since the beginning of the year, Etihad launched or resumed operations to 10 destinations, including services to Tel Aviv in April.

"As soon as destinations are added to the Abu Dhabi green list or UAE travel corridors, we are seeing a three- to six-fold jump in bookings in some cases, showing there is a tidal wave of demand waiting to be unleashed," Mr Douglas said.

The airline continued to grow its global network throughout the first half of 2021 as destinations were added to the Abu Dhabi green list and travel corridors were formed with the UAE.

The number of passenger destinations grew by 20 per cent in the first six months of the year to 60 cities as Etihad Airways continued to rebuild air connectivity to the UAE capital.

Etihad currently operates 64 aircraft, including five freighters, after deciding to “indefinitely park part of its fleet as a result of the pandemic”, it said.

The airline said earlier that it would park its Airbus A380 superjumbos. The backbone of the Etihad fleet is the Boeing 787 Dreamliner, of which it has 39 Boeing 787-9s and 787-10s in the fleet.

More than 92 per cent of its UAE-based staff have chosen to take the Covid-19 vaccine, it said.

In February 2021, Etihad became the first airline in the world with 100 per cent of operating pilots and cabin crew on board vaccinated to help curb the spread of the coronavirus, the company said.

"While the pandemic still poses challenges, Etihad is on the path to becoming a sustainable and profitable business," said Mr Boukadida.