x Abu Dhabi, UAEWednesday 17 January 2018

$1.7bn sales put Etihad on track to break even

Etihad Airways enjoyed a record first half as it saw revenues climb 28 per cent, to $1.72bn - with video.

Etihad's first half revenue was up 28 per cent to US$1.72 billion. Andrew Parsons / The National
Etihad's first half revenue was up 28 per cent to US$1.72 billion. Andrew Parsons / The National

Etihad Airways is on track to meet its break-even target this year after boosting revenues by 28 per cent between January and last month, to US$1.72 billion (Dh6.31bn).

The Abu Dhabi airline is in a watershed year as it seeks to put itself on a path to sustainable profits while boosting its operations with new aircraft and routes, as well as the signing of one of the biggest football sponsorships ever with a10-year deal with Manchester City last week.

The half-year turnover, on the back of a 14 per cent rise in passenger traffic to 3.8 million compared with the same period last year, helped the airline earn profits for the period before interest and taxes.

But the company did not disclose its figures.

"The business is maturing with each passing year," said James Hogan, the chief executive of the eight-year-old carrier, who disclosed that over the first half of the year the airline managed to lower its unit costs by 2 per cent.

"Our revenue and capacity is rising at a greater rate than the costs of infrastructure, administration, and normal overheads," Mr Hogan said. "The growing pains of our initial years are less pronounced."

Airlines worldwide are enjoying strong demand in air travel, particularly in the high-value premium cabins, despite facing challenging conditions in key markets.

During the first half of the year, parts of the Middle East were riven by unrest, and Japan's powerful export economy was temporarily crippled by an earthquake, tsunami and nuclear crisis.

While oil prices remain high, officials said the airline's hedging strategy, in which it buys jet fuel in bulk several years ahead of time, helped cushion against recent cost increases.

"It is encouraging to see them moving in the right direction," said John Strickland, an aviation consultant at JLS Consulting in London, who pointed to the Middle East's strategic location to capture increasing long-distance travel in a globalised economy.

"The growth of Etihad, as with Emirates Airline and Qatar Airways, benefits from their location. It was a stroke of fortune that their location in the Gulf, and due to the range of current and future aircraft, fits so well with the way the world economy is moving."

With rival airlines fighting their Gulf counterparts' growth by lobbying governments to restrict access, Middle East airlines such as Etihad are increasingly emphasising financial stability, Mr Strickland said. "They all want to show focus on profits."

With five new wide-bodied aircraft joining the fleet to support the summer schedule, made up of three Airbus A330-300s and two Boeing 777-300ERs, Etihad is opening new routes and adding frequencies to existing destinations.

Manchester becomes a twice-daily destination next month, while daily services have also been introduced to Geneva, Milan and Beijing. Extra flights are being added to its operations in Erbil, Iraq, and the Belgian capital, Brussels.

Last week it announced it would launch flights to Chengdu and Shanghai in China in December, while services to Male in the Maldives, and the Seychelles, start in November.

Etihad's cargo operations, which make up 20 per cent of overall revenues, reported strong growth with revenues up by 32 per cent in the first half of the year, bolstered by improvement in tonnage and yields. Top markets included the UK, Germany, China and India, while new freighter services were inaugurated to Johannesburg, Amsterdam and Kabul.

Chris Logan, a travel and leisure analyst at Echelon Research in London, warned that worldwide, airlines could be at a risk of expanding too quickly during a time of volatile fuel prices.

"Flag carriers are growing too quick for US$118 oil," he said. "No one is stretched financially, and I don't expect anyone to cut capacity in the next few months, but oil is a problem."