Etihad Airways taking measures to deal with virus outbreak, chief executive says

Coronavirus crisis reinforces Etihad's transformation plan targets to become 'lean and efficient' operator

Tony Douglas, chief executive officer of Etihad Airways, speaks at their pavilion during the first day of the 16th Dubai Air Show at Dubai World Central (DWC) in Dubai, United Arab Emirates, on Sunday, Nov. 17, 2019. The Dubai Air Show is the biggest aerospace event in the Middle East, Asia and Africa and runs Nov. 17 - 21. Photographer: Christopher Pike/Bloomberg

Etihad Airways said it is taking a series of measures to reduce costs and conserve cash as the novel coronavirus outbreak pummels the global aviation industry.

The Abu Dhabi-based airline is negotiating "significant" cost reductions across its supply chain, discussing "material" payment deferrals with plane makers or aircraft lessors and "doing all we can to conserve cash", Tony Douglas, Etihad Aviation Group's chief executive, told The National on Sunday.

So far, 2500 Etihad Airways employees have agreed to take voluntary unpaid leave as the carrier suspends over half of its routes due to tighter travel restrictions worldwide. More than half of the airline's staff are currently working from home, for safety measures, and in a "clear illustration that you can't continue business as usual when it's anything but", he said.

"I can honestly say I have not got up one morning in the last two or three weeks without the the goalposts not fundamentally changing yet again," Mr Douglas said. "This event, the likes of which none of us has ever seen, is hugely ambiguous by nature...No one's crystal ball is well-calibrated enough for this, the trick is to embrace the ambiguity, be agile and be adaptive."

Airlines around the world have slashed capacity, axed jobs and issued pleas for state support in order to survive the pandemic, which presents the greatest challenge to the aviation industry to date.

Etihad, much like the rest of the industry, is seeing a drop in its international bookings in March and expects the trend to continue in April and May, Mr Douglas said.

"January was our best month ever, we smashed all of our targets in terms of international bookings, with load factors north of 80 per cent," he said. "By March, we and the rest of the industry, are in negative sales as the cost of theoretical cancellations was greater than the cost of sales."

The Covid-19 outbreak has cost Middle East airlines $7.2 billion (Dh26.4bn) in revenue as of March 11 and the cancellation of 16,000 passenger flights since January, according to the International Air Transport Association. 

Etihad, which is in the midst of a five-year turnaround plan to narrow annual losses, is in better shape to deal with the crisis after transforming into a medium-sized operator, Mr Douglas said. Since its restructure began in 2017, the state-owned airline has overhauled its cost base, dropped unprofitable routes, cut jobs and renegotiated plane orders while focusing on point-to-point traffic.

"If we were still heavy and unfit, we'd find it difficult to move quickly," he said. "One of the few advantages we’ve got now is medium size of the fleet and the agility to respond quite quickly," he said.

The airline is currently operating only 44 per cent of its routes and responding to the hit in global travel demand on affected routes through various measures: switching from an Airbus A380 to the smaller Boeing 787 Dreamliner or reducing flight frequency as it revises its network daily – sometimes up to eight times a day, Mr Douglas said. 

Iata has urged governments worldwide to assist their cash-strapped airlines with urgent financial relief measures and estimated they collectively need $200bn in aid. The trade group Airlines for America called on the US government to provide $58bn in grants, loans and tax relief to US airlines.

US carriers, which had previously accused Gulf airlines of receiving unfair government subsidies, are "now understandably" reaching out for "massive state aid," Mr Douglas said.

Etihad has been been working on streamlining its operations for the past two years and is in many ways now "match-fit" in facing the Covid-19 crisis, Mr Douglas said.

Mr Douglas said his top concern during this time is the uncertainty of the situation.

"We still have no idea how long this will go on for... and what the consequences will be longer term for the aviation sector," he said.

The crisis will change the landscape of global aviation, he added.

"Not everyone will make it out the other side," he said. "There's every chance that there may be some degree of consolidation. I wouldn't be surprised if what follows the virus resolving itself, is economic consequences that will take time to reset."

Etihad said it is offering more flexible terms on its tickets to help passengers adjust travel plans amid the fast-changing situation where some countries have ordered a lockdown, others tightened travel bans, while others yet have suspended flights.