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Etihad in trouble: Can’t keep up, slashes jobs, future not clear

The years have not been kind to Etihad Airways. The airline reported losses in 2016 and 2017, and things weren’t that much better in 2018.

Now, the airline has shared some more troubling news. Not only has it cancelled the purchase of 10 planes from Airbus, but, under mounting costs, it has also fired 160 pilots.

Will 2019 hold more trouble for the airline? And how are other airlines doing?

More trouble already

This latest bit of news came from a report by Bloomberg, highlighting that the company continues to struggle to handle rising costs amid successive negative cash flows. The airline has yet to release its full 2018 report, but based on its track record, the year might not have been too kind.

“Abu Dhabi-based Etihad canceled the purchase of 10 A320neo single-aisle jets, based on the latest monthly order figures from Airbus, while a letter to staff indicates that the flight-crew jobs, representing about 2.4% of pilots, will be eliminated by the end of this month,” Bloomberg reported.

2016 saw the airline report $1.95 billion in losses. 2017 proved a slightly better year, but the company was still in the red, reporting $1.52 billion in losses.

According to the American news site, thousands of positions have already been eliminated as Etihad halts its planned expansions in an attempt to challenge Gulf rivals Emirates and Qatar Airways. Aviation Analyst reminds that the airline has continued to cut key international routes, including to the US, and has even sold ownership of its major lounges worldwide.

Chief Executive Officer Tony Douglas said in July that more posts would be cut, and that jetliner orders were in doubt as he focused on local needs rather than carrying passengers between continents.

In a letter seen by Bloomberg, Sulaiman Yaqoobi, vice present for flight operations, tells staff the global economy is “extremely challenging” and that Etihad must slash operating costs as much as 10% to reflect shrinking capacity. He describes the pilot cuts as a “small reduction” out of a total of 2,065, of which 160 are “surplus.”

He adds that the past year was “extremely challenging”, and this is expected to continue into 2019, in a foreboding revelation. It would seem that this is not the end of the turbulent atmosphere for Etihad.

READ: Saudia and Etihad announce codesharing deal, plan cooperation

The signs were already there

Saj Ahmad, Chief Analyst at StrategicAero Research, told AMEinfo that the cancellation was a long time coming.

“Etihad’s cancellation of ten A320neo’s is not that surprising given that its regional network has shrunk by way of exiting the Iran market as well as cessation of flights to Qatar,” he said.

However, Etihad’s major backlog (around 160 jets) comes into play.

“That said, they have a number of slightly bigger A321neo’s on order that will ultimately replace the current A320s in service,” he continued. “Without knowing the exact terms of the pilots, some may have been on fixed term contracts with others possibly even outsourced agency crews – so cutting overheads while it’s fleet is changing and network reduction is a prudent step on the path to profitability.”

Etihad has been cleaning house in recent years, in an effort to update its aircraft.

“Many ageing A330s have recently exited the fleet as more fuel efficient 787-9s and 787-10s have come in to service,” Ahmad continued. “So, it stands to reason that Etihad needs fewer pilots to fly one fleet of the same airplanes and will be in a better position to roster those crew it has as it looks to once again expand its network in the future.”

READ: Etihad vs. Emirates: Will Etihad be able to keep up?

How are other airlines doing?

Emirates, Etihad’s primary competitor, is doing much better.

Having reported a profit for 30 years in a row in the 2017-2018 period, the Dubai-based airline is a prime picture of health. It operates more routes than Etihad, flying to 157 destinations, compared to Etihad’s 84 (as of 2018). It also has triple the amount of employees Etihad has on contract, and essentially had a 18 year head start on Etihad, being the older airline.

Emirates is in fact bumping up its daily trips to Africa and Europe, in a recent bit of news. This comes following increasing demand by consumers for these destinations.

Other regional competitors, such as Saudi Arabian Airlines/Saudia, continue to do well. Saudia is enjoying success, nearing the completion of its SV Strategic Plan 2020, which has seen it develop its service significantly with state of the art technologies and innovations.

The airline reported a passenger growth to 32.16 million guests in 2017, achieving an 8% increase in one year. Hajj also continues to be a major driver of traffic.

According to a 2017 Reuters report, the Saudi airline was anticipating a return to profit, following a few years of losses that have been slowly eroded by the Strategic Plan.

READ: Airbus’ fate uncertain: Emirates airline is the deciding factor