Etihad Aims To Stand Out and Grow More
“Etihad Airways is the fastest-growing airline in the history of commercial aviation,” said James Hogan, president and CEO, upon the announcement that Etihad will begin nonstop flights to Los Angeles from Abu Dhabi beginning June 1, 2014.
Etihad plans to fly daily flights with Boeing 777-200LRs, configured with a three-cabin layout. Los Angeles will be the fourth U.S. destination for the airline, which already flies to Chicago, New York City, and Washington, D.C. To support the expansion to the West Coast, Etihad signed an agreement to purchase five 777-200LRs from Air India. By the end of the year, its fleet will grow to 87 airplanes, which includes the Air India jets and 14 new jets delivered by Boeing and Airbus during 2013.
Hogan explained that although owned by the government of the United Arab Emirates, Etihad was created “on a hard-nosed business model” and not as a government-subsidized national airline. “The brief that they gave me was clear: the airline had to be safe, which you’d expect from any airline chief executive; [and] it certainly had to be best in class.” With far-larger Emirates Airlines headquartered in Dubai, Etihad isn’t trying to be the world’s biggest airline, Hogan explained. Also important is the airline’s role in helping Abu Dhabi, the capital of the UAE, grow and provide jobs and become a destination for world travelers.
Etihad is run like a publicly listed company, including regular financial audits by KPMG and audits of the auditor by the Abu Dhabi Accountability Authority. “They audit KPMG to make sure that KPMG has audited us properly,” Hogan said. “They’re very focused on good governance.”
With its hub in Abu Dhabi, the move into Los Angeles offers new connections for multicultural travelers who want to fly throughout the Middle East and Indian subcontinent. The addition of Los Angeles will grow Etihad’s U.S. operations by 33 percent. “We always wanted to come here, it’s a vibrant market,” said Hogan.
During the third quarter of 2013, Etihad saw passengers served climb to more than three million and total revenue up 11 percent to $1.4 billion from $1.3 billion in the third quarter of 2012. The revenue breakdown was $1.03 billion for passengers (up 10 percent) and $244 million for cargo (up 39 percent).
One of the key factors in Etihad’s growth is its partnership programs; between codeshares and airlines in which Etihad holds equity, revenue in the third quarter climbed 36 percent, to $247 million, compared to the same period last year. Partnership activities include purchasing 24 percent of India’s Jet Airways, which is still under regulatory review but represents “the first offshore investment in an Indian airline under the country’s Foreign Direct Investment legislation,” according to Etihad.
Etihad is managing Air Serbia, Serbia’s national airline, in a five-year agreement signed with the Serbian government, and it has grown its ownership of Virgin Australia to 19.9 percent. All of these equity alliances give Etihad a stronger hand in negotiating better prices with vendors and aircraft manufacturers.
“We fly into each others’ cities,” Hogan explained, “and we open up markets together. As an airline [together] we have 500 aircraft. And we source as one, now.” This means that for the partners’ purchase of a total of 66 Boeing 787-9s (41 for Etihad), they were able to negotiate for the same GE engines and also plan a pilot training center in Abu Dhabi. “Come together, and we all win,” he said.
Hogan said the challenge for Etihad is how to differentiate the airline from its competitors. “How do I differentiate? Service, service, service.” Etihad’s 777-200LRs will carry 237 passengers. The “Diamond” first-class section offers eight enclosable suites upholstered with Italian Poltrona Frau leather and fitted with cotton sheets, full-size pillows and duvets. The “Pearl” business-class section holds 40 flatbed seats, each with aisle access. In the “Coral” economy section, 189 passengers can be accommodated, and they receive four-course meals (three main dish choices) and real blankets and pillows.
All passengers have access to more than 650 hours of in-flight entertainment content. Economy passengers will be able to graze on snacks and beverages, while business- and first-class passengers have access to a full-time airborne chef who offers dine-on-demand instead of scheduled meals. “The galley is a larder,” said Hogan. Other amenities, such as a flying nanny to help lone mothers and fathers care for small children, further the Etihad difference.