Etihad prepares to lift off for new horizons

INDUSTRY INSIGHTS FORUM: The Abu Dhabi carrier has enjoyed an impressive rise to prominence since its inception by Royal Decree in 2003, now it plans to diversify - with video.

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With profitability in sight, Etihad Airways is preparing for its next phase of growth, in which it aims to evolve from strictly an airline operator into a more diverse business.

Its areas of interest are set to include the travel agency and hotel industries.

The Abu Dhabi airline had a strong year last year when revenue grew by 29 per cent compared with 2009, to US$2.95 billion (Dh10.83bn), and passenger traffic rose 13 per cent to 7.1 million.

The state-owned airline, which was launched at the end of 2003, expects to break even this year and plans to record sustainable profit levels thereafter, said James Hogan, the chief executive.

At The National's Industry Insights forum on aviation yesterday, Mr Hogan said Etihad was investing in a destination marketing company.

Etihad’s competitors had benefited from owning related businesses such as ticketing and cargo operations, which helped offset the fall in air traffic during the global downturn, he said, singling out the role the Dnata ticketing agency has played in aiding Emirates Airline.

“In tough times the advantage that Emirates has, and Singapore Airlines has, is they are consolidated groups – so other areas have supported [the business] like cargo, or Dnata-type operations,” he said. “We are very keen to do our own retail operations in a Dnata-type business.”

Etihad received two new Airbus A330 freighters for its cargo division last year and plans to take delivery of its first Boeing 777 freighter this year. But opportunities for expansion are not limited to adding aircraft, with an Etihad presentation to bankers last month in London including the possibility of creating an “intra-Gulf road freight capability” to improve profitability.

Etihad also aims to start handling non-traditional cargo items, such as valuable artworks, as Abu Dhabi builds its cultural district, with its several museums.

“We are looking now, as we move forward on the back of our freighter fleet, how can we improve our business. We are in discussions with other transport providers to enhance our cargo capability and the cargo products that we can carry. An obvious example is art. As museums come online, we’d like to have the ability to handle those types of goods,” Mr Hogan said.

With thousands of new hotel rooms expected to become available in Abu Dhabi over the next few years, Mr Hogan is also preparing to embark on a marketing programme with local hoteliers.

“Now that the [hotel] stock is coming online, the key issue is how … our holidays division and how … our marketing teams are coming together to push the brand,” he said. “Etihad, and TDIC [Abu Dhabi’s Tourism Development and Investment Company], and ADTA [the Abu Dhabi Tourism Authority] are all coming together to tackle that question,” he said.

Etihad’s partnership with local hoteliers underscores the airline’s position as a flag carrier, and its responsibilities to help drive Abu Dhabi’s long-term development plan.

The relationship is part of its commercial mandate, which includes assisting the emirate’s ongoing diversification ambitions as laid out in the Plan Abu Dhabi 2030.

That was apparent in 2008, when Etihad worked with local firms to leverage large aircraft orders with Boeing and Airbus to help the emirate’s fledgling aerospace industry gain a foothold.

This included the creation of Strata Manufacturing in Al Ain, which produces aircraft parts.

“When we signed the aircraft order at the Farnborough [International] Airshow, people said, ‘How can an airline that just started up sign a deal out to 2020 and beyond?’ But then you look behind that deal you saw the involvement of Mubadala [Development], and the involvement of Abu Dhabi Aircraft Technologies, when the three of us came together.”

Mubadala Development is a strategic investment company owned by the Abu Dhabi Government.

“It is not often with Boeing and Airbus you can [get] a great deal, and this was one of those occasions,” Mr Hogan added.

"You see a composite factory they are building in Al Ain, and you see the capability with GE, with Rolls-Royce," he said. "I think the way Abu Dhabi is working is seen as smart."

This year, Etihad plans to add two destinations, Mr Hogan said, declining to disclose further details. That would mark a slowdown from last year, when it added seven new cities to its network.

With seven new aircraft arriving this year, bringing its fleet total to 64, Etihad will instead add new frequencies to existing routes with the goal of offering more daily services for business travellers.

Out of this year’s new aircraft, five deliveries are for wide-body aircraft due in the summer, including two Boeing 777-300ERs and three Airbus A330-300s, helping Etihad boost services to US, China and five European cities.

Later in the year, the airline is to receive an Airbus A320, giving it greater flexibility in short-haul operations.

igale@thenational.ae