Etihad Airways narrows annual loss to $1.52 billion amid strategic review

Airline reported 22 per cent reduction in full-year operations losses as sales rose 1.9 per cent to $6.1bn last year

An Etihad plane bound for Abu Dhabi was forced to turn back shortly after takeoff. Vasily Fedosenko / Reuters

Etihad Airways will focus on point-to-point traffic serving its Abu Dhabi hub after narrowing annual losses to $1.52 billion amid a major turnaround plan.

The state-owned carrier will continue to monitor capacity and review its route network after posting its second consecutive full-year loss, it said in a statement on Thursday. Rising oil prices could provide a boon to its oil-rich home base and boost corporate bookings.

Etihad has improved revenues and cash flow but the measures are “solid first steps in an ongoing journey to transform this business into one that is positioned for financially sustainable growth over the long term,” Tony Douglas, chief executive officer of Etihad Aviation Group who joined in January, said.

The Abu Dhabi carrier is undergoing a structural and strategy change amid a company-wide review as it backs away from a growth policy of buying minority stakes in global airlines. Last year it withdrew from troubled Air Berlin and Alitalia, who filed for insolvency. Halving the number of its equity holdings, it has overhauled the business by appointing a new CEO, scrapping unprofitable routes and slashing costs after it made a loss of almost $2 billion in 2016.

In 2017, the airline’s losses resulted from a “significant” increase in its fuel bill, an investment into its restructuring program and loss in business from its former equity partners Alitalia and Air Berlin, it said.

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Last year’s core airline losses narrowed by 22 per cent as sales increased by 1.9 per cent to $6.1 billion and costs dropped by 7.3 per cent. It reduced capacity, replaced older jets with more fuel-efficient planes and focused on the more profitable point-to-point routes.

The company’s earnings reflected the airline unit’s core operations and excluded one-time items. It did not provide a net figure or results for other units within the Etihad Aviation Group.

Etihad carried 18.6 million passengers, little changed from the previous year, while its load factor-- a measure of seats filled – declined slightly to 78.5 per cent. Its capacity growth was reined to one per cent as its expansion plans were reviewed and passenger yields—an indicator of air fares—rose nine per cent in the fourth quarter.

A jump in oil prices, which hit $80 a barrel in recent weeks, could be an opportunity to lift corporate travel demand and improve premium bookings but also mean an increase in fuel costs.

“We made significant progress in driving improved performance and we are on track in 2018,” Mohamed Al Mazrouei, chairman of the board of Etihad Aviation Group, said.

Etihad took delivery of 12 new aircraft in 2017, including two Airbus A380s and nine Boeing 787-9 Dreamliners, which replaced older Airbus A340, A330 and A319 jets.

The carrier halted service to Dallas-Fort Worth, Entebbe, Jaipur, San Francisco, Tehran, and Venice last year amid its network review. It started a service to Baku in March and will begin flights to Barcelona in November.

Emirates has said it is exploring ways for closer co-operation with Etihad without flouting competition rules. The UAE-based airlines could consider joint purchases and sharing facilities in countries they both serve, Emirates’ chairman Sheikh Ahmed bin Saeed Al Maktoum said.

Etihad is open to collaboration with Emirates where there is mutual benefit, Mr Douglas said in April, adding that Etihad will take a sustainable approach to expansion and will not become a boutique airline.