Etihad Airways sure has come a long way, as the carrier’s owners are now considering taking the airline public. This would be the first time we see something like this happen at a Gulf carrier, so it could have major implications (though I should note that there have been discussion in the past about other Gulf carriers going public, though it didn’t end up happening)…
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Major Gulf carriers are currently all government owned
For some background, virtually all of the major Gulf carriers are owned by their respective governments, either directly, or through some government owned investment fund. This is logical, when you consider that historically Gulf carriers haven’t just been purely profit-driven businesses.
Rather, they’ve historically been about putting their respective hubs on the map, and facilitating trade, tourism, and more. For example, one wonders where Dubai would be without Emirates.
Going back many years, some Gulf carriers were happy lighting billions of dollars on fire, as part of a larger political and economic strategy for the country. That was always controversial globally, especially in the context of airlines competing freely. It’s why the “big three” US carriers ran a smear campaign against the Gulf carriers many years back, though in the meantime they have major partnerships in the region.
We have to give Gulf carriers credit, as they’ve exercised a lot more fiscal discipline in recent years, and at least post-pandemic, the “big three” Gulf carriers are consistently reporting significant profits
Now, in fairness, Gulf carriers do have some economic advantages that airlines in other regions don’t have. They have access to cheap money, and since the governments typically own the airlines, the airports, etc., they don’t have costs that are as high as what you’d find in other regions.
Etihad Airways may be taken public
In recent days, there has been significant talk of the possibility of Etihad Airways going public. The company’s CEO, Antonaldo Neves, has even confirmed this in interviews. Now, of course he frames it a little differently, suggesting that the management team is trying to be ready in case this is what the company’s owners desire.
Etihad is currently owned by The Abu Dhabi Developmental Holding Company (ADQ), which is a sovereign wealth fund. ADQ has reportedly been having conversations with banks about a possible deal as soon as this year. If this were to happen, it would be the first privatization of a major Gulf carrier. ADQ has already brought several companies that it owns public.
I think the logic for Etihad going public is pretty obvious — this is intended to boost the stock market in the UAE, attract more international investment, and diversify the economy away from oil.
However, arguably an airline like Etihad going public also has some downsides. Etihad’s management team would be even more focused on exclusively maximizing shareholder value, and the government would have less control over the carrier’s strategy.
We’ve seen Abu Dhabi have serious shifts with regards to its strategic vision for Etihad — in 2014, Etihad wanted to compete directly with Emirates, grow massively, and acquire stakes in all kinds of airlines. In 2019, after losing billions of dollars, the airline did a 180, and tried to shrink into profitability. This was all part of the government’s vision, which obviously evolved over time. The airline going public would give the government less control over what the future holds for the airline.
Then again, it’s not like Etihad even has that much potential to change its business model. It has a hub in Abu Dhabi, and the airline has its “Journey 2030” strategy for sustainable growth. Etihad’s current management team has been doing a phenomenal job with the airline, and I don’t think that will change. Furthermore, presumably the government would still be a major shareholder, and would therefore have some control over the direction of the airline.
During the pandemic we saw airlines around the globe struggling. Even for publicly traded airlines, the reality is often that profits are privatized, while losses are socialized. I imagine this wouldn’t be any different at Etihad, if the airline found itself in tough times.
I’m curious to see how this all plays out, because there could be a domino effect from this.
Bottom line
Etihad Airways’ owners are signaling that the company may be going public, and this could happen as soon as this year. While there had been discussions about this at other Gulf carriers in the past, it didn’t ultimately go anywhere.
Etihad is well positioned financially for going public, at least compared to any other point in the company’s history. Given the important strategic role that airlines play in the Gulf region, I’m very curious how this all plays out.
What do you make of the prospects of Etihad (or another Gulf carrier) going public?
Etihad would not be the first Gulf carrier to go public. Air Arabia went public in 2007 and is still listed on the DFM exchange in Dubai.
Where would Dubai be without Emirates? A better question would be where would Dubai be without oil?
Dubai doesn't have much oil.... that was the whole point of creating the likes of EK and diversifying their economy.
Of the UAE's typical 3-4million bpd, the overwhelming majority of that production is from Abu Dhabi and other emirates, not Dubai.
You’re right about Dubia diversifying their economy. My comment was referring to the time oil revenue was about 50 percent of their GDP which gave them the money to open up and diversify their economy. Even as late as around 2008 Abu Dhabi gave Dubai 20 billion dollars when Dubai’s economy was failing. I have to admit that I really don’t understand very much about the UAE but I do admire what Dubai has accomplished. Thanks for your comments.
Externally, the image of EY looks good - from a financial perspective. Internally, the organisation is dying.
Successive cuts in people, demoralised staff, no bonuses even in light of “record” revenues and profits. It’s a pretty bad place to work, reflected in cabin crew and back office staff.
The current management, especially revenue department, are badly managed and directionless. They have brought with them a LCC culture which is not yet reflected in...
Externally, the image of EY looks good - from a financial perspective. Internally, the organisation is dying.
Successive cuts in people, demoralised staff, no bonuses even in light of “record” revenues and profits. It’s a pretty bad place to work, reflected in cabin crew and back office staff.
The current management, especially revenue department, are badly managed and directionless. They have brought with them a LCC culture which is not yet reflected in the public image.
Some positive changes have been implemented but a host of these came from the previous executive team - not the genius of the current CEO.
In short, it’s a lousy airline, with management who have a poor track record who throw their people under the bus. While the airline will survive and maybe thrive, it has a toxic culture that is frankly awful to work in - I don’t see how they will hold onto any talent at all to make the company grow.
What are you talking about? I work at Etihad, and in the revenue department, and frankly things have never been better. The current management team is razor focussed on results, and they have taken steps to make Etihad a results driven organization. The people complaining are the ones who lived by politics, working 9-12, and collecting pay while the company generated billions and billions in losses every year.
Something drastic needed to be done, and...
What are you talking about? I work at Etihad, and in the revenue department, and frankly things have never been better. The current management team is razor focussed on results, and they have taken steps to make Etihad a results driven organization. The people complaining are the ones who lived by politics, working 9-12, and collecting pay while the company generated billions and billions in losses every year.
Something drastic needed to be done, and I am glad the leadership team has done it. Most of these success have been driven by the revenue department with the best top line performance improvement of any major airline. Talent is flocking to Etihad, and those shown the door surprisingly not finding jobs anywhere else.
As we have heard the leadership team say, change is not easy. I am really glad we finally have direction and a sense of where we are going, and results to show for it.
I think it should be emphasized that just because they're issuing an IPO, doesn't mean they're going to float a majority of their shares. For all we know, this could put 10-25% or something like that, out there. Government would still be the controlling shareholder by an overwhelming measure, and have the greatest presence on the board and over executive decisions.
I agree with one thing Ben mentioned. Etihad and it's new management team is definitely on the roll! They just announced USD 400M operating profit with strong performance in passenger revenues. No wonder they feel strongly on an IPO. If the performance was not this strong, I dare say that the Government of Abu Dhabi who care about their brand, would even entertain these rumors.
I'm curious about the place listing would be held. Dubai? London? NY?
Probably Abu Dhabi.
All six wealthy GCC states have steadfastly changed their domestic and foreign policies since Covid to adapt to the fast evolving dynamics in the region. Israel is no longer an eternal enemy as it never attacked them. Iran, Shia muslims and the Palestinians are now their existential threats. Their oil reserves are depleting and they need white westerners presence in their countries to defend foreign muslim aggression. They certainly do not want to embrace capitalism...
All six wealthy GCC states have steadfastly changed their domestic and foreign policies since Covid to adapt to the fast evolving dynamics in the region. Israel is no longer an eternal enemy as it never attacked them. Iran, Shia muslims and the Palestinians are now their existential threats. Their oil reserves are depleting and they need white westerners presence in their countries to defend foreign muslim aggression. They certainly do not want to embrace capitalism fast and furious if they study hard and understand what it is doing to the US economy and population. I was bewildered to learn last year that Japan eliminated the concept of " from cradle to grave" employment a decade ago.
Public Service Announcement. Everything written by Globetrotter regarding the GCC/Middle East, is categorically and historically wrong.