Complex Made Simple

Etihad Airway’s 2019 earnings reveal that losses may soon end

Etihad Airways's transformation is on track, with 55% cumulative improvement in core results since 2017.

32% improvement in 2019 core operating performance over 2018, on revenues of US$ 5.6 billion 11% (US$ 0.65 billion) reduction in direct operating cost 17.5 million passengers and 635,000 tonnes of cargo were carried

Another year behind us is another year with Etihad in the red. The Abu Dhabi-based airline has had to contend with significant losses since 2016, when it made it recorded a whopping $1.95 billion loss. Since then, the company has been reporting reduced losses year after year. In 2017, the number was $1.52 billion, and in 2018, that number dropped to $1.28 billion. Now, with the latest earnings report, losses were reduced to $0.87 billion in 2019. 

Last year, and as reported by Reuters, chief commercial officer Robin Kamark said that Etihad Airways expects to return to profitability in 2023. This comes after the company launched a five-year transformation program in 2017 to help and improve financial performance. 

As for the rest of the 2019 results, Etihad reported 32% improvement in core operating performance for 2019, on revenues of $5.6 billion (2018: $5.9 billion). The airline’s aforementioned transformation programme has seen cumulative core operating performance improved by 55% since 2017.

Etihad carried 17.5 million passengers in 2019 (2018: 17.8m), with a 78.7% seat load factor (2018: 76.4%) and a decrease in passenger capacity (Available Seat Kilometres (ASK)) of 6% (from 110.3 billion to 104.0 billion). Yields increased by 1%, largely driven by capacity discipline, network and fleet optimisation and growing market share in premium and point-to-point markets. Due to the capacity reduction, passenger revenues slightly decreased to $4.8 billion (2018: US$ 5 billion), but route profitability improved. 

Total operating costs were significantly reduced, driven by a continuous focus on cost control and favourable fuel price trend. Financing costs remained flat despite the delivery of new aircraft to the fleet.

Read: PR disaster: Boeing employees claim the 737 MAX was “designed by clowns”

Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group, said: “Operating costs were reduced significantly last year and both yields and load factors were increased despite passenger revenues being down due to network optimisation.”

He added: “There’s still some way to go but progress made in 2019, and cumulatively since 2017, has instilled in us a renewed vigour and determination to push ahead and implement the changes needed to continue this positive trajectory.”

Read: Etihad’s clever PR stunt latest among daring Arab airline campaigns

Commenting on the earnings report, Saj Ahmad, Chief Analyst at StrategicAero Research, stated that “Etihad’s performance in 2019 shows a stark improvement in contrast to where it was two years ago.”

Unlike Kamark, Ahmad believes Etihad could return to profitability by 2022: “While the airline still accumulated losses, considering the paring back of routes, reduction in frequencies and overhauling its fleet, Etihad is losing less money than before – putting it on track to get into the black by 2022.”

“That revenue and passengers flown remained flat, it’s clear that Etihad is monetizing demand and driving up yield whilst at the same time boosting load factors above 78%.”

Now, with the Coronavirus outbreak ravaging international aviation markets, Etihad, like competitors, is likely to have a rough time. 

“It’s too early to tell the financial fallout – if Etihad starts standing down a sizeable portion of its fleet and puts staff on leave, then things could suddenly undo their hard work,” Ahmad noted. “Right now – Etihad has to continue its path of reining in capacity and concentrate on how best to extrapolate profit from its better performing routes will culling those that aren’t worth keeping. In tandem with this, the induction of more 787s that’ll save on fuel and operational costs while phasing out the pointless likes of the A380 will become even more urgent.”

Read: flydubai reveals 2019 earnings, makes a fiscal rebound to profitability