Abu Dhabi, UAEMonday 19 March 2018

Everyone wins if we make sure Open Skies stay open

By encouraging open competition, both the industry and consumers will benefit, writes James Hogan, president and CEO of Etihad

Etihad Airbus 380 makes its first landing on the new South Runway after announcing its opening yesterday at Abu Dhabi International Airport. Ravindranath K / The National
Etihad Airbus 380 makes its first landing on the new South Runway after announcing its opening yesterday at Abu Dhabi International Airport. Ravindranath K / The National

Few global policy initiatives have been more successful than Open Skies. Over the past 20 years, global air travel has quite literally taken off, as decades-long bureaucratic walls have fallen. More people are travelling than ever before and the world’s airlines have responded with new aircraft, new routes, improved service and more affordable fares.

That is, all the world’s airlines except the US Big Three, who would rather turn back the clock on competition and rebuild those walls.

Open Skies, for those who don’t know, was initiated more than 30 years ago, to encourage more air services between the US and international markets. The government of the day, and many since, saw the massive benefits of more travel, more trade and more tourism.

Now these airlines – which have grown to be three of the largest global carriers, through a mix of open access to those international markets, coupled with no access for their foreign competitors to the largest domestic market in the world –have cried foul.

A 55-page dossier, handed out to select officials and journalists, was said to lay out a series of hard-hitting revelations about our business. Except they weren’t hard-hitting and they weren’t really revelations.

Etihad Airways has never tried to hide the fact that we have received equity funding and shareholder loans from our sole shareholder, the Government of Abu Dhabi.

The Government of Abu Dhabi took the decision to set up its own airline in 2003, to take advantage of a niche in the market and the benefit of location for a Gulf hub, as a core element of its long term economic diversification plan.

As one of the newest national airlines anywhere in the world, we’ve had to create everything from scratch: every bit of our product, every bit of our operations and every bit of our infrastructure.

The Government’s investment during this phase of our growth has been investment in a new business and investment in a successful one. Etihad Airways has grown to become a 15 million passenger airline, with 111 aircraft serving 111 destinations and widely recognised as one of the best in the world. That’s no mean feat in only 11 years.

In virtually every market we’ve entered, we’ve had to face existing competitors, with established businesses, established infrastructure, established sales and marketing, established brands and established customer bases.

In many cases, those established airlines were gifted amazing infrastructure – airports, terminals, slots, landing rights, fuel tax breaks and more – over decades.

To take them on, we’ve had to work harder and we’ve had to work smarter. That’s called competition.

We’ve been helped by our geographic position. The Gulf is at the centre of today’s trade and travel routes. Today’s aircraft technology and the changing patterns of world trade mean we are positioned strongly for many new and emerging markets.

We’ve been helped by our blank sheet of paper – no legacy systems, no legacy aircraft and no legacy mindsets.

And we’ve been pushed hard by the vision and ambition of our shareholder to create a globally competitive airline.

That shareholder has also pushed us hard to create a sustainably profitable airline. We moved into profitability within a decade – a feat you will have heard of from few other, if any, national airlines.

They pushed us to that target because they want to see a return, like reasonable investors in every market.

The secret of our success is this: incredible customer service, delivered on modern new aircraft, with world-leading products, at competitive prices, on the routes people want to fly.

At Etihad Airways, we’ve built on that core successful offer, with a unique twist: our partnership approach.

We work with other airlines – 49 at the latest count – to improve each other’s networks and give greater customer choice.

We’ve made minority investments in strategic partners, which allow all of us to benefit from new revenue streams and, most importantly, lower costs. (Yes, for an airline supposedly awash with subsidies and free kicks, we are surprisingly focused on costs!)

And we have entered long-term relationships with key suppliers, giving us the latest aircraft and technology – at the lowest prices.

The result is a business which now reaches across the world, with a cost base among the lowest quartile of international airlines, delivering growing revenues and sustainable profit.

Etihad Airways has said nothing until now on this debate. We’ve found it interesting to watch as US groups with the most at stake – airports, cargo carriers, business travellers, hospitality interests and others – have spoken out very forcefully in support of Open Skies.

So they should. Open Skies encourages new air services.

There is a pretty simple equation in air travel. Liberalisation encourages new market entrants. New market entrants act as catalysts for markets to grow. Consumers see more choice; the industry sees more customers; economies benefit from trade and tourism. It’s a win-win-win.

The entrenched interests of three dominant carriers (together, they carry 34 times more passengers than Etihad Airways) should not be allowed to turn those wins into losses.

The biggest winner from our new competition is the traveller.

Today, we offer millions of customers a new choice – in many markets, the only choice – to get to the United States, or to scores of other destinations.

Let’s keep the skies open. Let’s keep winning for the customer.

James Hogan is president and CEO of Etihad Airways