Impressive: Etihad “Only” Lost $870 Million In 2019

Etihad has just announced their 2019 financial results, which the airline seems quite proud of — Etihad lost “just” $870 million, bringing cumulative losses over the past four years to over $5.6 billion.

In fairness, maybe a loss of just $870 million is impressive, when you consider they lost $1.95 billion in 2016, $1.52 billion in 2017, and $1.28 billion in 2018.

Etihad’s 2019 financial results

Etihad Airways lost $870 million in 2019 on $5.6 billion in revenue. As a point of comparison, in 2018 the airline had a $1.28 billion loss on $5.9 billion in revenue. This means:

• The airline saw a 32% improvement in core operating performance
• The airline saw a 55% improvement in core operating performance compared to 2017
• Etihad’s 2019 loss exceeded their internal expectations
• The airline reduced direct operating costs by $650 million, or 11%

To look at some other key metrics:

• Etihad carried 17.5 million passengers in 2019, compared to 17.8 million passengers in 2018
• Etihad’s load factor was 78.7% in 2019, compared to 76.4% in 2018
• Etihad’s capacity decreased by 6% in 2019 in terms of available seat kilometers, from 110.3 billion to 104 billion
• Etihad’s yields increased by 1%
• Etihad’s passenger revenue decreased to $4.8 billion in 2019, from $5 billion in 2018
• Etihad’s on-time performance was the best in the region — 82% of departures were on-time, 85% of arrivals were on-time, and 99.6% of flights were completed

As far as operational highlights go:

• In 2019, Etihad took delivery of eight 787-9s and three 787-10s, while retiring all A330s
• The fleet count at the end of 2019 was 101, including 95 passenger planes and six cargo planes
• Etihad’s average fleet age is just 5.3 years
• As of the end of 2019, Etihad flew to 76 destinations, with frequencies being increased to London Heathrow, Riyadh, Delhi, Mumbai, and Moscow Domodedovo

As Tony Douglas, Etihad Group’s CEO, describes the performance:

“Operating costs were reduced significantly last year and both yields and load factors were increased despite passenger revenues being down due to network optimisation. An improvement to the cost base significantly offset the cost pressures faced by the business, giving us headroom to invest in the guest experience, technology and innovation, and our major sustainability initiatives.

There’s still some way to go but progress made in 2019, and cumulatively since 2017, has instilled in us a renewed vigour and determination to push ahead and implement the changes needed to continue this positive trajectory.”

My take on Etihad’s losses

Oh, Etihad. I mean, an $870 million loss is better than a $1.95 billion loss. But let’s also keep in mind that in previous years much of the losses came from Etihad’s poor investments, including in airberlin, Alitalia, and Jet Airways.

At this point Etihad isn’t wasting as much money on silly investments, but rather is focusing on their core business.

An $870 million loss on $5.6 billion of revenue is still massive. That’s especially true when you consider that this is well into the transformation process, and this loss comes as the airline has allegedly cut direct operating costs by $650 million year over year.

Some metrics are mildly positive, like a 2% increase in load factor and a 1% increase in yield. But when you consider that these results come after the airline has cut all kinds of unprofitable routes, has cost cut their experience and added ancillary revenue, and has optimized their fleet, it doesn’t seem as promising.

Etihad is now well into their five year transformation plan, and I really wonder how they plan on improving performance from here. What’s left for Etihad to optimize at this point?