Etihad CEO Douglas Tightens Grip on Carrier to End Losses

(Bloomberg) -- Etihad Airways Chief Executive Officer Tony Douglas laid out plans to scale back the carrier’s global ambitions following almost $3.5 billion in losses, saying more jobs may be cut and that jet orders are in doubt after a “whirlwind” six-month review since he took charge.

Douglas will take personal responsibility for the main airline business, moving incumbent Peter Baumgartner to the new position of special adviser, and confirmed that Etihad will focus more on serving Abu Dhabi, where it’s based, than carrying globe-trotting passengers between continents.

The CEO revealed in an interview on Tuesday that thousands of jobs have already gone in the past 18 months as Etihad puts the brakes on a long-running and costly attempt to close the gap with larger Persian Gulf rivals Emirates and Qatar Airways. He’s also in negotiations with Airbus SE and Boeing Co. after concluding that doubling the fleet is no longer viable, calling into question scores of wide-body orders.

“The eventual aim of this process is for Etihad to be in the best shape to ensure its long-term sustainability, enabling it to meet the challenges of an aviation industry in constant flux,” he said.

Baumgartner will become senior strategic adviser to Douglas as part of the management overhaul, having run the main airline operation since May 2016, when the last major structural change at the carrier saw the creation of Etihad Aviation Group as an umbrella company.

Divisional Revamp

The latest moves will see the business divided into seven divisions covering operations, commercial activities, maintenance, finance, human resources and support services, as well as a new “transformation” function. That’s likely to lead to further job cuts, Douglas said.

Douglas said the focus on Abu Dhabi will prioritize point-to-point flights over the super-hub model that the carrier previously pursued as it sought to attract customers making flights between Asia, Europe, Africa and the Americas.

That in turn it will reduce the need to swell the fleet from about 110 planes now. Etihad currently has one of the biggest backlogs in global aviation with 98 unfilled orders at Airbus and 77 with Boeing. The tally includes A350, 777 and 787 wide-bodies usually deployed on intercontinental routes.

“We don’t believe that doubling the size is likely to be sustainable at this time, but we’ve got enduring long-term relationships with the aircraft manufacturers and therefore that process is constantly under review,” Douglas said.

Route Analysis

Etihad has scrapped some marginal routes including San Francisco and Edinburgh and further destinations are also likely to be abandoned, though others, such as Barcelona, will be opened, the CEO said.

“Networks need to be reanalyzed,” he said. “Years ago it would’ve been quarterly, today it needs to be almost needs to be almost minute by minute.”

Etihad has already retreated from the so-called equity alliance strategy devised by former chief James Hogan, which saw it splurge cash on a clutch of struggling carriers, among which Air Berlin Plc and Alitalia SpA filed for insolvency last year.

Douglas said that he’s open to closer relations with Dubai-based Emirates, while adding that it is for the owners of the two carriers to decide whether they should in any way be brought together.

“There is a proximity, we are like-minded, on a personal level we get on extremely well, and where there is opportunity in a non-competing way to get mutual advantage, frankly why wouldn’t you? For us it would probably be looking to learn, as simple as that.”

Premium Economy

Douglas, who was previously in charge of procurement at Britain’s defense ministry and before that ran Abu Dhabi and London Heathrow airports, added that the aim is to make Etihad “a reinvigorated innovator brand, with an optimized and profitable network.”

The carrier is looking at introducing a premium economy cabin to offer a wider variety of fares, he said, though there are no immediate plans to introduce a low-cost, long-haul operation.

Etihad last month posted a $1.52 billion core airline loss for 2017, narrowing from $1.95 billion a year earlier, when demand was hurt as the low price of crude weighed on oil-producing Gulf economies. Revenue improved 3.4 percent last year though passenger numbers were virtually static at 18.6 million.

--With assistance from Giovanni Prati, Hussein Slim and Benjamin Katz.

To contact the reporters on this story: Layan Odeh in Abu Dhabi at lodeh3@bloomberg.net;Manus Cranny in Abu Dhabi at mcranny@bloomberg.net;Mahmoud Habboush in Abu Dhabi at mhabboush@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Christopher Jasper

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