Etihad Airways has forecast a "positive" outlook for this year after narrowing its annual core operating loss by 72 per cent in 2021 in an "extraordinary turnaround" driven by record cargo revenue, cost-cutting measures and debt reduction, its chief executive said.
The airline reduced its core operating loss to $476 million in 2021, from $ 1.7 billion in 2020, ending the year with a surge in passenger traffic during the fourth quarter after Abu Dhabi eased pandemic-related travel restrictions, Etihad Airways said on Tuesday.
"It's been such a long time, given the pandemic where everything has been under a cloud of negativity," Tony Douglas, chief executive of Etihad Aviation Group, told The National.
"But we've got a set of results that aviation followers will conclude are a big surprise in a positive way and will be held out as an extraordinary turnaround.
"We pressed on with our transformation programme and … the numbers speak for themselves."
Etihad Airways has pushed ahead with a five-year restructuring programme that transformed it into a medium-sized airline as it reduced its fleet, network and workforce.
During the pandemic, the airline took further steps to reduce costs and preserve cashflow, which together with its transformation programme has placed it in better shape to deal with the global crisis, it said.
'Positive' outlook for 2022
Etihad is bullish about continued passenger demand growth this year and plans to expand its workforce to meet the anticipated market recovery.
"There's every reason to maintain a positive outlook," Mr Douglas said, given the lesser severity of the Omicron variant of coronavirus, higher consumer spending and continued easing of travel restrictions.
"We've got every confidence that 2022 will continue to build demand and ditto on cargo."
"That aside, I'm very optimistic that 2022 is going to play out really positively," Mr Douglas said.
"We took a brave pill and did some of the things we had to do earlier on, and as a result, 2022 will be another year of solid progress for us."
Etihad is seeking to hire about 1,000 cabin crew, catering and ground services staff during the year as the market rebounds, he said.
At the end of 2021, the total workforce stood at 12,533 employees. Staff salary reductions, which began in 2020 during the pandemic, ended in October, Etihad said.
The airline remains on track for its target to return to profitability in 2023 and this could happen earlier if the market continues to recover, or a "bit later" if it is hit by unexpected variables, Mr Douglas said.
Easing travel restrictions around the world will spur "a lot of latent demand" and revenge tourism, he said.
"Revenge tourism" is travellers taking longer and more expensive holidays to thumb their noses at lockdowns caused by the pandemic.
"We have a set of stellar results and I'd like to think we're better placed now than we've probably ever been as Etihad to take advantage of this … and to be financially sustainable from a profit point of view," Mr Douglas said.
"Some people would have thought, 'the pandemic will have knocked them off track on their transformation programme and delayed it by a few years', but it's quite the opposite.
"These results show that we've not only maintained momentum, we've built on it."
Record cargo revenue
Etihad's cargo revenue jumped 49 per cent year on year to $1.73bn in 2021, the highest in the airline's 18-year history, as it carried 27 per cent more freight volumes of 729,200 tonnes in 2021, amid a global rise in cargo yields.
"At a time when passenger numbers were coming down, that was a massive benefit, no question about it," Mr Douglas said.
"Certainly at the early stages during the pandemic, when there were no passengers, cargo was the only game in town and we could see logistics and air cargo rates go through the roof."
The airline's pharmaceutical shipments increased 85 per cent year on year in 2021 amid the global health crisis, while it ran 30 humanitarian aid initiatives carrying nearly 230,000 people, from minority groups to refugees, to communities hit by natural disasters.
Etihad used the more fuel-efficient Boeing 787 Dreamliners to operate cargo operations as freight rates climbed.
"We had a far more fuel-efficient aircraft operation that we got a mini-network going literally off the back of cargo," he said.
"And as passenger restrictions eased, we were able to almost build passengers back into a cargo network. Strategically, it gave us a bit of flexibility and cargo has definitely been a big win."
Mr Douglas said he was "bullish" about cargo yields remaining strong in 2022 and that there was "significant opportunity" in cargo operations.
"In terms of yield and in terms of opportunity, I would anticipate 2022 to be another great year for cargo."
Five Boeing 777 passenger jets that Etihad temporarily converted for cargo flights are in the process of having passenger seats refitted as travel restrictions ease and more markets such as Manila and Jakarta reopen.
"We're looking to retain agility and flexibility as we see certain markets come back," Mr Douglas said. "Being a medium-sized carrier that's agile by nature, it's easier to adapt more quickly than if we had been the old Etihad."
In February, Etihad signed a letter of intent for seven Airbus A350 freighters amid a continued boom in air freight demand as as home-bound shoppers turn to e-commerce.
"We will look to convert [it] into contract by the middle of the year," Mr Douglas said. He said the letter of intent was a separate deal and not a swap of existing aircraft commitments.
"We've gone for the Tesla of the cargo world, while a lot of the cargo world is still operating 1980s Ford pick-up trucks," Mr Douglas said.
He was comparing the new fuel-efficient A350 freighter with older models such as the Boeing 767 and 747 freighters.
"We are buying a ticket into the future when it's a reasonably safe bet that the 1980s Ford pick-up truck isn't going to play a part commercially."
Airbus A350 passenger jet debut
As travel restrictions and new coronavirus variants dampened demand, Etihad carried 3.46 million passengers last year, down from 4.15 million in 2020.
Average seat load factor — a measure of how well an airline is filling available seats — dropped to 39.6 per cent, down from 52.9 per cent in 2020.
But as Abu Dhabi began to relax mandatory quarantine requirements in September, its home airline's passenger revenues rebounded in the last quarter of the year, recovering to 50 per cent of 2019 levels in December.
Load factors in the first and second quarter were in the "mid-20s" but jumped into the 70s in the final quarter, Mr Douglas said.
Etihad is planning to debut first of its five A350-1000 passenger jets into service by the second quarter of 2022, with the remaining planes joining the fleet at a pace dependent on market conditions, Mr Douglas said.
"It's a world-beating proposition," he said.
Strongest balance sheet in a decade
Etihad reduced its outstanding debt by 20 per cent after issuing a $1.2bn sustainability-linked loan tied to environmental, social and governance (ESG) targets.
"That replaced extremely expensive previous debt, which had matured, with a sustainable product at a fraction of the rate," he said.
It reduced operating costs by $110m, despite a $197m increase in fuel costs driven by higher oil prices.
Fixed overhead costs and finance costs also fell by 14 per cent (or $110m) and 20 per cent (or $90m), respectively.
Earnings before interest, taxes, depreciation and amortisation, or Ebitda, improved by more than $1bn, swinging to positive territory of $408m from a negative Ebitda of $651m in 2020.
"We've now got the strongest balance sheet in over a decade," Mr Douglas said. "This was always part of the transformation programme … but this is probably the first time we've had numbers that are way ahead of expectations rather than on trajectory."
In 2021, Etihad's low-cost joint venture Air Arabia Abu Dhabi launched seven new destinations, expanding its network to 15 cities by year-end.
It launched year-round flights to Tel Aviv and Vienna and introduced seasonal routes to capture leisure summer and winter demand, including new services to Malaga, Mykonos and Santorini.
Etihad's passenger routes grew 28 per cent in 2021, from 50 up to a high of 64 during the summer peak, it said.
Total fleet comprised 67 aircraft, including five freighters and 39 Boeing 787-9 and 787-10s.
Etihad, which is aiming for net-zero carbon emissions by 2050 and is focused on sustainable air travel solutions, achieved a 5.6 per cent reduction in the emission intensity of its passenger fleet in 2021, it said.
The airline's sustainability programme, previously focused on its fleet of GEnX-powered Boeing aircraft under the "Greenliner Programme", was expanded in 2021 by a similar initiative focused on Rolls Royce XWB-powered A350s under a programme called "Sustainability50".
Both programmes are aimed at researching and developing new technology and methods of flying to help decarbonisation efforts and boost operational efficiencies.
Almost 30 per cent of the airline’s global supply chain is driven by UAE-based businesses, with Etihad growing its local spend through a programme called Al Watani to support the development and sustainability of local businesses.