Etihad Considers Cancelling Aircraft Orders Amidst Billion Dollar Losses
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Abu Dhabi-based Etihad Airways is struggling financially, and it looks like the airline is considering some drastic measures to cut its losses, including restructuring or outright cancelling tens of billions of dollars of its outstanding aircraft orders.
The latest financial result reported by Etihad was a loss reported in July 2017, a jaw-dropping $1.87 billion for 2016. Illustrating the scale of that loss, the airline’s reported revenue for 2016 was just $4.9 billion, meaning the loss was 38% of gross revenue. Obviously, that’s an unsustainable path and one that’s going to require major adjustments to reverse — yet, it’s gotten worse since the end of 2016. In early 2017, the US carry-on large electronics ban went into effect, adding cost and reducing revenue.
Since then, Etihad has made some noteworthy revenue-raising and cost-cutting changes. VIP lounges in NYC and Melbourne — which were once reserved for passengers in The Residence — are now available for just $40 on a first-come first-serve basis. The airline has dropped its complimentary chauffeur service for premium passengers and cut flights and routes to the US.
In addition, Etihad has reduced the number of aircraft it operates, from 121 at the end of 2015 to 115 at the end of 2017, along with cutting its destinations — dropping 17 destinations from mid-2016 to just 100 current destinations. Despite these cutbacks, the airline has an incredible 176 aircraft currently on order with Airbus (98) and Boeing (78). That doesn’t jive with new Etihad CEO Tony Douglas’ recent statements that the airline is aiming for “growth in a sustainable way” through “very disciplined, very measured” decisions.
So, it’s not surprising that Reuters is reporting today that Etihad is considering cutting its aircraft orders to stem losses and re-focus its strategy. According to multiple sources, the airline is weighing its options, which include swapping models, delaying deliveries and outright cancellations.
Currently, Etihad has outstanding orders for:
- Airbus A350: 62
- Boeing 787: 52
- Boeing 777: 26
- Airbus A321neo: 26
- Airbus A320neo: 10
When it signed its large aircraft orders in 2013, Etihad noted that it could transfer some of these aircraft to airlines it’d invested in, but things haven’t gone well for investments in Air Berlin and Alitalia. Other airline investments include Air Serbia (49%), Air Seychelles (40%), Jet Airways (24%) and Virgin Australia (24.2%).
Etihad isn’t the only Middle Eastern airline struggling. Qatar’s losses are so big that its outspoken CEO recently pined for US Chapter 11 bankruptcy protections. Meanwhile, Etihad’s fellow UAE-based airline Emirates is parking widebody aircraft due to a lack of pilots and seemingly low demand. Emirates has flown at least 15 aircraft into storage this year, including five aircraft in five days last week.
What does this mean for travelers? While we might not see any immediate changes, if Etihad is considering paying aircraft order cancellation fees, it’s likely looking into other drastic cost cutting measures that are going to impact passenger experience as well.
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