Home Uncategorized Etihad airways records net loss of $1.87 billion in 2016

Etihad airways records net loss of $1.87 billion in 2016


Etihad Airways recorded a net loss of $1.87 billion for 2016, reversed from a net profit of $103 million in 2015.

The Abu Dhabi-based carrier made the loss on revenues of $8.36 billion, down from $9 billion for the preceding year.

Etihad said exceptional charges were major factors behind the huge deficit and its core airline operation had turned in a “solid performance.”

Impairments totaling $1.9 billion included a $1.06 billion charge on aircraft, reflecting lower market values and the early phase-out of certain aircraft types. The carrier also recorded an $808 million charge “on certain assets and financial exposures to equity partners, mainly related to Alitalia and airberlin.”

Etihad owns 49% of Italian flag carrier Alitalia and 29.21% of airberlin. Both European carriers have been hemorrhaging cash, with Alitalia in the local equivalent of Chapter 11 proceedings and airberlin wet-leasing 38 A319/320s to Lufthansa Group companies Eurowings and Austrian Airlines. Etihad Aviation Group and airberlin also plan to sell off the latter’s Austrian subsidiary FlyNiki.

The $8 billion revenue figure includes activities such as Etihad’s ground handling, catering and engineering subsidiaries, as well as revenue from areas such as leasing of aircraft and interest earned on loans.

Etihad said its core airline business achieved passenger revenues of $4.9 billion, the same as 2015. Passenger numbers, at a record 18.5 million, were up from 17.6 million in 2015. Load factor declined slightly, to 78.6% compared to 79.4% for 2015.

ASKs increased 9% to 113.9 billion. Etihad was affected by the industry-wide squeeze on yields, which declined 8% amid market capacity pressures and the global economic climate. However, this was partially offset by an 11% reduction in unit costs.

A slowdown in the cargo market also put increased pressure on freight revenues (down to $900 million compared to $1 billion year-over-year) and yields. The airline saw a slight improvement in freight carried at 595,519 tonnes.

“A culmination of factors contributed to the disappointing results for 2016,” Etihad Aviation Group chairman Mohamed Mubarak Fadhel Al Mazrouei said.

“The board and executive team have been working since last year to address the issues and challenges through a comprehensive strategic review aimed at driving improved performance across the group, which includes a full review of our airline equity partnership strategy.

“The record passenger numbers in 2016 affirm Etihad’s role as a significant economic enabler for Abu Dhabi.”

“We are focused on maintaining the solid performance of our core airline business—operationally and financially—even amid difficult market headwinds,” interim group CEO Ray Gammell said. “At the same time, we continue to implement changes across the group as part of the comprehensive strategic review, with a focus on improving revenues and reducing costs.

“During 2016, the airline commenced a ‘Right Size & Shape’ program that generated overhead savings of 4% through headcount reductions and other measures by the end of the year, even as capacity and total passenger number increased.”

Gammell added, “This year is just as challenging for the global aviation industry and the ever-evolving competitive environment is likely to impact overall performance in 2017. However, our airline business remains strong and class-leading, and as an aviation group, we are in a stronger position.”

More detail was provided by Etihad Airways CEO Peter Baumgartner: “We are in an industry characterized by overcapacity, declining market sizes on key routes, and changing customer behavior as a weak global economy affects spending appetite,” he said.

“Our answer to these challenges is innovation and reinvention, and this gives Etihad Airways a competitive edge. Operationally, we performed well in 2016. We maintained load factor levels even as we increased capacity. Yields were under pressure in all cabins, with business class impacted particularly as corporate travel policies continued to encourage flyers to downgrade to economy,” Baumgartner said.

“Our fuel hedging positions, which helped manage fuel spend during the oil price boom, yet significantly impacted our cost base last year, will taper during 2017. We are also seeing promising improvements in the contribution made by our ancillary revenue strategies, and we expect those to offset some of the yield declines,” he added.






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