Etihad Airways, the national carrier of the United Arab Emirates, reported a full year earnings before interest (EBIT) of $137 million, on revenues up 36 per cent to $4.1 billion (versus $2.98 billion in 2010). The results included earnings before interest, tax, depreciation, amortisation and rentals (EBITDAR) of $648 million, with a net profit of $14 million. The record result exceeded the airline’s 2011 target, which was to break even. The airline had initially established a 2010 deadline to break even, but deferred it by one year after the onset of the global financial crisis.
James Hogan, president and chief executive officer of Etihad Airways, said: “Five years ago we said we would be profitable by 2011. Despite the global financial crisis, continued high oil prices, regional instability and natural disasters, we have delivered. Now, we move into the next phase of our development whereby we deliver consistent, sustainable profitability.”
“And we will aim for strong growth again in 2012, in spite of the tough global economic environment, with a passenger traffic target of 10 million and a corresponding increase in profits,” Hogan said.
Some of the key highlights 2011 results included; 8.3 million passengers, up 17 per cent on 2010 (7.1 million); an average seat factor of 75.8 per cent, nearly two percentage points higher than 2010 (74.0 per cent); a growth of available seat kms from 45.2 billion (2010) to 51 billion, up 13 per cent and the addition of five new routes – Bangalore, Maldives, Seychelles, Chengdu and Düsseldorf. Etihad Crystal Cargo revenues up 25.7 per cent to $651 million ($518 million) on tonnage up 17.8 per cent to 310,188 tonnes (263,313 tonnes) and an increase in total aircraft departures, from 57,534 to 62,735, with a technical dispatch reliability of 99 per cent; as well as eight new codeshare agreements, taking Etihad Airways’ codeshare partners to 35 airlines, which increased its worldwide network to 259 destinations – more than any other Middle East air carrier.
Etihad Airways’ successful partnership strategy intensified, with its first equity investment in another carrier – Air Berlin, Europe’s sixth largest airline, announced in December 2011 and Hogan added that the airline will consider taking additional stakes in other carriers to further increase its range and potential profitability.
“The Air Berlin deal will be our most important catalyst for growth in 2012. It has given us instant access to Europe’s largest travel market, and will have a major impact on revenues in 2012, with an expected contribution of up to $50 million.” The purchase gives Etihad access to 33 million new passengers flying with the German carrier and to the European market. The airline also announced a 40 per cent stake in Air Seychelles with a $20m deal in January 2012.
“And of course, 2011 marked the first full year of Etihad Airways’ strategic partnership with Virgin Australia, which offers 45 destinations in Australia and the Pacific, and boosted revenue by 700 per cent over what we achieved with our previous Australian airline partner.”
Hogan said cost control had been a significant contributor to the airline’s profit, with costs per available seat km (CASK), excluding fuel, being cut by 4.6 per cent in 2011 and 16.6 per cent over the last two years, representing annual savings of more than $187 million.
“While we deliver an exceptional full service product, our management culture is that of a low cost airline. We have a forensic focus on cost control in every area of the business, aggressively targeting operational efficiencies.”
The airline also continued its policy of fuel hedging, which has protected the airline from the volatility of oil prices. More than 80 per cent of fuel costs were hedged in 2011, while the figure for 2012 is currently 75 per cent.
In January 2012, Etihad commenced operations to Tripoli, and Shanghai and Nairobi will follow in the first quarter. In July, the airline will add an additional African destination, Lagos and will continue to announce new destinations in the coming months.
“We remain a business that is investing heavily in new routes, in new aircraft and in new infrastructure,” said Hogan. “In 2012, we will add seven aircraft and have already announced plans to extend our network in Asia and Africa as well as more routes into the Americas, Europe and South East Asia.”
Etihad will take delivery of four Boeing 777 planes and three Airbus A320s this year. Financing for two of the A320s is already in place. Etihad Airways ordered 100 new aircraft and 105 options and purchase rights at the 2008 Farnborough Air Show. This gives flexibility in its network growth, enabling it to meet passenger demand over the next 10 years.