Etihad's parable: from airberlin-Alitalia disasters to renaissance
A decade of poor choices and now the turnaround. Etihad Airways is changing its business model [...]
Etihad Airways
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A decade of poor choices and now the reversal. The airline Etihad Airways is changing its business model and global positioning, and the latest moves-from agreements with Air France-Klm to that with friend-rival Emirates to the new Abu Dhabi hub and the fleet renewal - are direct testimonies of an era that has definitely closed.
Long gone, then, seem to be the days of participation in Alitalia, airberlin and Virgin Australia: unscrupulous moves that have sunk the aforementioned companies and sent Etihad's plans into a tailspin.
Etihad's ambitions for 2030
Etihad's "renaissance" is the result of both the choices of the new ceo, Antonoaldo Neves, as well as the Middle East context that is in constant turmoil.
Just a few months ago, Neves - at the helm of Etihad from the end of 2022 - launched the airline's growth plan that includes the doubling of the fleet and the will to tripling the number of passengers over the next seven years, or by 2030.
An extremely ambitious plan for a carrier coming out of a less than happy period where the choices of alliances and stakes in various carriers did not pay off; while rival Emirates grew by leaps and bounds.
Etihad, in essence, hopes to carry 33 million passengers per year by 2030; when as of today it is stationary at about 13 million (which is still a 30% increase over 2022) going from the current 80 aircraft in fotta to 160.
Not only that, Neves believes that by 2030 the carrier will be able to serve more than 125 destinations, almost double the current 77 destinations.
"Etihad's growth will mainly focus on connecting short- and medium-haul destinations in the Gulf countries, India and Asia, as well as long-haul destinations in Europe and North America. The airline wants to introduce new destinations, provide more options and increase frequencies in major international markets. With strong shareholder support and a strategic plan in place, the airline is poised for sustainable and profitable growth," the ceo said in May.
The New Terminal in Abu Dhabi
The central node around which growth will take place is the Abu Dhabi hub, which since November-and after 11 years of waiting-has finally opened the Mid Field Terminal (meanwhile renamed Terminal A) Of the airport.
An opening that Etihad has been waiting for a long time to revamp the entire travel experience for its customers and bring it close to the levels of its competitors, from Emirates to Qatar Airways to Turkish Airlines. Indeed, over the years, Abu Dhabi's attractiveness has also "paid the price" vis-à-vis Dubai's relevant centrality both as a hub for air connections and as a destination in its own right.
The new Terminal, however, is massive and covers an area of 742 thousand square meters (One of the world's largest airport terminals by area). At full capacity it will be able to handle up to 45 million passengers a year, or three times the capacity of the two existing terminals combined.
In addition, as is already the case in Dubai, an important part of the area will be dedicated to retail and food & beverage: about 163 stores and restaurants will be present.
The agreements with Air France and Emirates
In the past few months alone, moreover, Etihad has scored two historic deals. In May, it signed a memorandum of understanding with rival Emirates to expand an interline agreement that will foster a Increased cooperation between the two carriers United Arab Emirates.
An "expanded" interline project - bordering on codeshare - that started already this summer for the tourists from Europe and China who can purchase a single ticket to fly to Dubai or Abu Dhabi, with a "seamless" (i.e., seamless) return via the other airport.
In late November, however, the Air France-KLM Group and Etihad Airways. have announced a new partnership between their respective loyalty programs as a result of the Memorandum of Understanding (MoU) signed between the two air groups in September 2023, which also includes numerous codeshares and agreements on traveler services.
In essence, members of the Flying Blue loyalty program, Air France and KLM, as well as members of Etihad Guest, Etihad Airways' loyalty program, can earn and redeem Miles on both loyalty programs when flying with Air France, KLM or Etihad. TFC has compiled a proper guide on this.
Not to mention, then, that Etihad has reignited the engines of its A380 where The Residence is present , that is. the best and most exclusive first-class cabin in the world that provides a three-room apartment consisting of living room, master bedroom and bathroom (with shower).
Meanwhile, the carrier also unveiled its new business class on board B787 Dreamliners and also opened its new lounge in the Abu Dhabi terminal.
A "forced" change of pace
In Neves' plans, however, there is also a focus on India. Currently, in fact, the carrier operates 180 flights per week to the Asian country and wants to continue to grow. The challenge will become increasingly complicated because the very flag carrier Air India has decided to invest in a maxi rebranding and an almost total fleet renewal that will put the airline back at the center of the regional and global air market.
At the same, time, Etihad's "renaissance" must come to terms with the new players: the change of course imprinted by Neves is all the more necessary at a time when new carriers (low-cost Wizz Air for flights to Europe, Air Arabia for routes to Africa and the Gulf countries) are appearing to fly from Abu Dhabi and while Saudi Arabia is launching Riyadh Air and reinventing Saudia for Challenging the very domain Of the Emirati carriers.
Last but not least: the spread of new ultra-long-range aircraft (the A321LR and XLR or the A350-1000) allow airlines to operate point-to-point flights long-haul flights by avoiding transit stopovers. Just think of Qantas' direct flights from Australia to Europe or Europe-Asia flights.
Growth at all costs
The business model of Gulf carriers differs from that of other carriers. In fact, the primary objective of these airlines has always been primarily to make it part of the global map of destinations their home cities, turning them into hubs and attracting travelers first by stop-over and then as final and central destinations.
Without Emirates there would be no Dubai, without Qatar there would be no Doha, without Etihad there would be no Abu Dhabi.
Despite the fact that the shareholders of these airlines have infinite economic resources, there is always a limit to losing investments. This has been the case with Etihad over the past ten years which decided to grow exponentially with the goal of transforming Abu Dhabi into a hub that could compete with Dubai.
The strategic choices, however, were a disaster. And even ex-ceo Tony Douglas, who now leads Riyadh Air, and who had nevertheless begun a journey to restructure Etihad's budget, network, and model.
"We are a teenage carrier, born only 17 years ago, and we made some mistakes in our early teens," Douglas said in 2021, "our strategy of quasi-alliance, or equity participation in other airlines was a way to grow quickly. Unfortunately, many of those investments turned out to be mistakes."
From Air Serbia to Alitalia: the disaster of the quasi-alliance
A decade ago, Etihad Airways had acquired the 49% in Air Serbia through a joint venture between Etihad itself and the government of Serbia.
In essence, from the old Jat Airways new Air Serbia was born, and Etihad not only owned almost half of the shares but also had a contract to run the carrier for a period of five years. In the second five-year period, however, Etihad began to withdraw.
The airlines that were part of the Etihad Airways Partners network.
In 2021, Etihad reduced its stake to 18%, the following year it dropped to 16%. And just this year, Abu Dhabi no longer controls a single share in the airline with the government recapitalizing the entire company.
A story that in some ways resembles those of Alitalia. In our country Etihad took over 49% of AZ's shares in 2015, only to come out of it altogether after only two and a half years following the rejection by employees of the restructuring plan that Emirati shareholders wanted to approve following yet another financial crisis at Alitalia.
Crisis--it must be said--also stemmed from the wrong business choices that the management of the times ( led by Etihad) had made. Following the rejection of the plan, Etihad abandoned AZ and the government had to intervene with continuous investment of public money until the closure and the birth of Ita Airways.
Alongside Alitalia, Etihad had quickly invested in airberlin (29%), which also in 2017 opened insolvency proceedings-after Abu Dhabi declared it would no longer support it financially-and ended flight operations.
Same end has come to India's Jet Airways in 2019-and again Etihad's investment was 12% of the shares-while Virgin Australia, which filed for bankruptcy in 2020 and is under new ownership, was controlled for 21% also by Abu Dhabi.
Etihad, finally, controlled Air Seychelles' 40% (the remaining 60% was in the hands of the archipelago government) but just a few months ago the Emirates sold its entire stake for the symbolic sum of one dollar.
The new era of Etihad
This is in short the chronicle of a disaster called the quasi-alliance where Etihad had quickly attempted to control some airlines Also involving them in loyalty programs and codeshares "strengthened" with the very aim of creating a global alliance that would put Abu Dhabi at the center.
Now, however, Antonaldo Neves wants to resume the course of investment starting with stronger partnerships, a renewed understanding with archenemy Emirates, but above all focusing on onboard services, more modern planes, and in the new terminal. At the center there is always Abu Dhabi, but this time perhaps Etihad has learned from its mistakes and is preparing for a new life-a renaissance.
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