Etihad Airways has just reported their 2018 results, and… they’re really, really bad. The press release about these results is titled “Etihad Airways Improves Core Performance in 2018 a Transformation Continues.” Well, that’s one way to look at it.
Etihad announced a loss of 1.28 billion USD on a total of 5.86 billion USD of revenue. As a point of comparison, in 2017 the airline reported a loss of 1.52 billion USD on a total of 6.0 billion USD of revenue. Emirates has revealed their financial results for the past financial year, ending March 31, 2019. Emirates did much better than Etihad.
Etihad began a five year transformation plan in 2017, when they cut off some of the airlines they had invested in that they realized they’d never be able to turn around. It seems the government of Abu Dhabi was no longer happy just flushing money down the drain, and actually wanted to make a more sustainable airline.
A couple of years ago Etihad stopped pouring money into Alitalia
So as much as their 2018 results are horrible, in fairness, they are significantly better than their 2017 results. Etihad says they’ve improved their core operating performance despite “challenging market conditions and effects of an increase in fuel prices.”
Some interesting stats:
- In 2018 Etihad carried 17.8 million passengers with a 76.4% load factor (in 2017 they carried 18.6 million passengers with a 78.5% load factor)
- Their capacity decreased by 4% in 2018 (based on available seat kilometers)
- The airline increased yields by 4%, driven by capacity discipline, network and fleet optimization, and growing market share in premium and point-to-point markets
- The airline reduced costs by 416 million USD to 6.9 billion USD, compared to 7.3 billion USD in 2017
- Direct operating costs were reduced by 226 million USD, or 3.6% (bye bye pajamas, lounge spas, etc.)
- Administration and general expenses declined by 190 million USD, or 19%
Etihad reported a load factor of 76.4% in 2018
As Etihad Group CEO Tony Douglas describes it:
“In 2018, we continued to forge ahead with our transformation journey by streamlining our cost base, improving our cash-flow and strengthening our balance sheet.
Our transformation is instilling a renewed sense of confidence in our customers, our partners and our people. As a major enabler of commerce and tourism to and from Abu Dhabi, we are intrinsically linked to the continued success of the emirate.”
A few other interesting things to note about 2018:
- The airline ended unprofitable routes to Tehran, Jaipur, Entebbe, Dallas, Ho Chi Minh City, Dhaka, Dar es Salaam, Edinburgh, and Perth
- The airline took delivery of eight new planes, including three 787-9s, four 787-10s, and one 777-200 freighter
- The airline says that they’ve had a “particular focus on inflight retail offering, unbundling of services and fares, and installation of new seating products”
Etihad took delivery of seven 787s in 2018
Bottom line
Losses of 1.28 billion USD on a total of 5.86 billion USD in revenue are really rough, if you ask me. Still, it represents a significant improvement over the past two years — in 2017 the airline lost 1.52 billion USD, and in 2016 the airline lost 1.95 billion USD. That’s a total of 4.75 billion USD in losses over the past three years.
The most concerning thing is at this point they can’t blame the losses on airberlin, Alitalia, etc. They’ve divested from many of these failed airlines. They’ve also done a huge amount of cost cutting in 2018, and passengers have noticed.
It’s not like Etihad’s losses are just a few percent of their revenue. This past year their losses were equivalent to 22% of their revenue. No matter how you slice it, that’s really, really rough.
The airline has 111 planes, so if you take their losses and divide them by the number of planes, each plane in their fleet loses the airline an average of $32,000 per day. Let me note that I realize this is a completely oversimplified (and actually worthless) metric, though I think it at least helps demonstrate the scale of their losses.
Etihad A330
We know that Etihad is undoing their growth planes from the past by canceling aircraft orders, but at this point I question how much more they can do to really turn around their results.
Love the comparison of the ME3 vs the US3 on cost structures although they belong in two altogether different spaces. The US3 survive due to a large domestic market, supported by the poor alternative modes of transit been major cities in part due to heavy lobbying by the US3 on ensuring states are not incentivized to invest in things like super fast rail connectivity. That could be considered an indirect subsidy by many.
I flown with Emirates & Qatar multiple times - but Etihad has always been on my to-do-list. Year after year I feel this weird pressure increasing... that I need to get onboard before company goes down, before ME3 becomes ME2. It may not be imminent, but I'd say its a strange way to choose your flight: experience it before company goes to bankruptcy :D
Ditto Ditto Ditto, ChrisC: perhaps if they stopped sponsoring football and other sporting clubs and venues they would have have reduced the loses.
Do any of these sponsorships ever lead to increased passenger flows? Are their ex-Man flights packed with Man City supporters?
I certainly won’t fly with an airline because they happened to have sponsored something. I want to fly with them because of destinations, service offered and price.
With results like this the big three US airlines aren't totally off base in saying at least Etihad is heavily subsidized. No private investor would put up with this. The company would have been in bankruptcy many times over by now with results like this, and probably liquidated rather than restructured since they just don't have a viable operation or even anything close to one -- even with no debt, they can't make money.
...With results like this the big three US airlines aren't totally off base in saying at least Etihad is heavily subsidized. No private investor would put up with this. The company would have been in bankruptcy many times over by now with results like this, and probably liquidated rather than restructured since they just don't have a viable operation or even anything close to one -- even with no debt, they can't make money.
That's different than US airlines that went through bankruptcy due to too much debt. Fundamentally the US airlines have a margin on their operations so they are sustainable if debt levels are brought under control. But this just isn't sustainable with anything other than massive government subsidies.
Etihad employed management who made Gulf Air into a shambles (before them it was a reasonable airline) - what were the Government thinking in the first place .
It was bound to end in the present mess.
I'm glad to see this airline in trouble. They have the most dishonest and unprofessional Corporate Customer Service team.
If they lose about 32K per day on one plane, can they ground one plane for a day? I need another car. They'd be doing charity so it's all good :)
I'm surprised Perth turned out to be unprofitable, given their partnership with Virgin Australia. Qatar & Emirates both deploy A380s on the route so I assumed ME3 carriers were doing just fine over there. Dallas had it coming thanks to the lack of AA partnership, that much is certain
Bangladesh flight also stop abudhabi to dhaka what the reason we don't know 2006start flight 2018oct 1 stop 1.5millon people travel this we hope agen open abudhabi to dhaka flights
Can we just get rid of Etihad and Qatar and have the only airline that’s worth something -Emirates- take other their routes?
@Robert - Agreed but with how AA has treated their loyalty program, it won't be long before they are facing a similar reality.
Uber loses about $1B/quarter and they're thinking of an IPO.
The problems they face seem similar to AA, an airline that loses money flying. Only Etihad doesn't have a loyalty program or credit card deals to ease the losses.
Loss making companies access the stock and bond markets all the time! You just need to convince investors that you will make money eventually ... I mean look at Uber.
"As a major enabler of commerce and tourism to and from Abu Dhabi, we are intrinsically linked to the continued success of the emirate." That tells the whole story doesn't it?
I'm struggling to see the "significant improvement" here. The load factor has fallen and revenue has fallen.
Doesn't look anything better than a marginal improvement at best.
@Josh. Agreed. That's kinda the point the U.S. carriers have been making that everyone rags on them for. But the fact of the matter is...American Airlines is showing a profit. A $300 million profit in 4Q...and the stock drops almost by half because investors are concerned it wasn't enough. Etihad has revenue of $5.86 b but loss of 1.28b. If you owned a deli and you charged $5.86 for an egg sandwich, but realized you...
@Josh. Agreed. That's kinda the point the U.S. carriers have been making that everyone rags on them for. But the fact of the matter is...American Airlines is showing a profit. A $300 million profit in 4Q...and the stock drops almost by half because investors are concerned it wasn't enough. Etihad has revenue of $5.86 b but loss of 1.28b. If you owned a deli and you charged $5.86 for an egg sandwich, but realized you lost $1.28 on the sandwich, you would have to raise your prices for the sandwiches you provide to $7.14 just to break even. If you owned the deli across the street and charged $7.50 for a sandwich your customers would keep telling you how lousy you are compared to the guy across the street, and deli bloggers might imply you are just whining.
Just off topic! AA started blocking Etihad business class award tickets from today. Yes, even Australian/ New Zealand call centers cannot see it!!! If you see upto 4-Seats available under "Guest Business" in Etihad award search you are out of luck. If you see Above 4 seats american agent is able to book, This happened just today early morning at 2am EST while i was on the phone with AA Australian agent.
If they would just make a $1K return to London "error fare" with The Residence. They would have enough cash for the upcoming years.
@Rob
Their ability raise finance was largely driven by the perception that they would be bailed out by the Abu Dhabi government in the case of default.
And an overall loss doesn't make all of their routes shit. I'd guess that routes to London and Paris still do rather well, the problem is that they have so many duds.
They can reduce direct expenses as much as they want, but if you consistently run load...
@Rob
Their ability raise finance was largely driven by the perception that they would be bailed out by the Abu Dhabi government in the case of default.
And an overall loss doesn't make all of their routes shit. I'd guess that routes to London and Paris still do rather well, the problem is that they have so many duds.
They can reduce direct expenses as much as they want, but if you consistently run load factors of 70ish% it shouldn't surprise people when you lose a bucket load of money.
perhaps if they stopped sponsoring football and other sporting clubs and venues they would have have reduced the loses.
Do any of these sponsorships ever lead to increased passenger flows? Are their ex-Man flights packed with Man City supporters?
I certainly won't fly with an airline because they happened to have sponsored something. I want to fly with them because of destinations, service offered and price.
Then there's the situation of Jet Airways, which is in a rather dire situation. EY's investment and possible increased investment there will be very interesting to watch.
They don't have to raise the money. They get it in one way or another from their government.
lol, operating losses of 20% hoooooo boy that's not going to last very long
*isn't the bond or stock market
You pointed out that they ended unprofitable routes like Tehran, Dallas etc. But if the airline loses over a billion dollars a year, every year, aren't all of their routes unprofitable? And for that matter, why haven't they gone bankrupt years ago? Where are they able to raise the capital year after year to keep a money burning machine like this running? Lord knows it is the bond or stock market.
When will Emirates just purchase them and get it over with?
They’ve sort of given up on US growth which is probably one of the issues. US economy is doing well and there’s always a constant stream of VFR traffic looking for the cheapest option to india/SE asia. Emirates does well collecting that traffic from the US while Etihad seems to be chasing pots of gold elsewhere
@ Mark -- I imagine in this case it's actually quite rational of them not to add US service. The VFR traffic to India just isn't profitable, and on top of that the airline hasn't managed to scale their operation in the same way as Emirates, so they really can't fully compete in terms of connectivity.
I just don't really see any independent future for Etihad, given that all they can do is slightly replicate...
@ Mark -- I imagine in this case it's actually quite rational of them not to add US service. The VFR traffic to India just isn't profitable, and on top of that the airline hasn't managed to scale their operation in the same way as Emirates, so they really can't fully compete in terms of connectivity.
I just don't really see any independent future for Etihad, given that all they can do is slightly replicate Emirates' route network, but not as well. A move to DWC and eventual merger seems inevitable...
"The airline reduced costs by 416 million USD to 6.9 billion USD, compared to 7.3 million USD in 2017'
The "7.3 million USD" should be "7.3 billion USD"
@ Neil -- Fixed, thanks!
...and worth noting those 1.3 bn do not include a provision for the ongoing airberlin litigation where the administration is seeking up to 2 bn Euros..