Etihad Rumored To Be Canceling Plane Orders As Part Of Restructuring

Among the “big three” Gulf carriers, Etihad seems to be struggling the most. That’s a combination of their failed investments in other airlines, their lack of strategy in building a profitable route network, and seemingly also largely the government somewhat cutting them off and telling them to stop losing money.

Meanwhile Emirates continues to do well (even though they’re parking some planes due to a pilot shortage), and Qatar continues to have the full backing of their government, despite losing a significant amount of money.

Etihad has been trying to cut costs, which has included changing their investments in other airlines (they cut off airberlin and Alitalia, Air Seychelles is restructuring, and Air Serbia is rumored to be next), and also has included cutting costs that impact the Etihad passenger experience.

It looks like their next cost cutting move won’t just be eliminating pajamas from business class, or getting rid of the shave salon from their first class lounge, but something much bigger. Reuters reports that Etihad is considering canceling some of the planes they have on order. The airline has a huge number of planes on order — they presently have 110 planes in their fleet, and 165 planes on order. These orders include:

  • 26 Airbus A321neos
  • 40 Airbus A350-900s
  • 22 Airbus A350-1000s
  • 8 Boeing 777-8s
  • 17 Boeing 777-9s
  • 22 Boeing 787-9s
  • 30 Boeing 787-10s


Etihad has 22 more Boeing 787-9s on order

As you can see, their plane orders are all over the place. Etihad placed most of these orders back in 2013, when they were pursuing an aggressive expansion strategy to keep pace with Emirates and Qatar. After a company-wide review, they’re now going for a different strategy, which seems to be to cut their way into profitability (or at least out of losses).

We don’t yet know the details of these changes, though sources familiar with the matter say that Etihad could be canceling a big percentage of the planes they have on order.

We’ll have to wait and see how this develops. Of course I don’t know exactly what kind of agreements they struck with Airbus and Boeing. Which planes Etihad decides to keep could be a function of which contracts they can most easily and inexpensively get out of, and also based on what kind of deals they got to begin with. My initial inclination is that:

  • They’ll keep the A321neo order, since it’s a lower capacity plane with good operating costs, which it seems like they could use
  • They clearly ordered too many widebody jets for an airline that doesn’t want to continue to grow at a fast pace; so between the 777, 787, and A350, I’d guess that they may very well cancel one or two of these plane types

Are you surprised to see Etihad considering canceling orders? Which orders do you think they’ll cancel?

Comments

  1. Under the 787 photo, you say, “…keep pace with Etihad…” I think you mean Emirates. Keep up the good work!

  2. I think that A321neo and the 787s are safe, because they already have so many 787s in the fleet. I could see them keeping the 777X planes, but they would defer the order for sure. They would likely be used for older 777 replacement down the road. The A350 is toast, imho. They don’t need them with the newer 777-300ERs and 787s. Adding a whole new type right now would be a bad idea.

  3. Since the 787 is already in service with Etihad, I would think the most likely scenario is that the A350 is canceled. They can keep flying their 777’s, which have comparable capacity and are fairly new.

  4. I was an Etihad Guest Platinum member for 3 years. I travel between Hong Kong and Paris at least twice a month. After some experience this year,I decide to say goodbye to this airlines. It is your fault to lost money,not passengers’. I can choose an airlines without budget cut.

  5. as someone who uses Qatar airways a lot, I was alarmed as you mentioned they run on losses. Do you have an article or a link pointing to that. Would hate if the prices go up significantly on Qatar.
    Your blog is outstanding, keep up the good work. Thanks

  6. They seem like the poorer, directionless cousin of Emirates, and quite unsure about where they fit. I rarely fly them: more expensive than competitors and largely without the benefits of partnerships/alliances.
    It’s a pity to see more airlines contemplating ditching the 350 in favour of the 787. I prefer the former.

  7. Wow oh wow, they have 110 planes. They also have 165 planes on order. And they were losing money. How the hell can you have 150% more planes on order than are in the current fleet? This airline cannot exist in its current state.

  8. @James Unfortunately they won’t merge as they are owned by two different governments.

  9. This is a constant evaluation that is not a one-time cut and then you are done for the next 10 years. This is a very agile business in a very agile environment, so it’s kind of business as usual.

  10. Have seen it coming! Good luck EY, you will need a lot of it in the coming months. You have lost a lot of symphathy. I never thought to say this..once an airline I admired and flown gladly in C and F, becomes one which I hate and shows my deepest pity! Only the future will tell if they could turn around their downfall. But the industry itself has no time and understanding for one of its former stellar child..it is business as usual! EY does not need our symphathy, it needs our hard earn cash!

  11. Truly, EY’s lack of talent amazes me and the airline deserves all their problems. They basically recruited low-skilled staff directly out of United (how EY thought that hiring glorified senior analysts from UA’s network planning team and making them senior managers and directors at EY would be a smart move is beyond me). On top of that, AUH is a horrible airport clearly not ready for expansion. Then for the grand finale, they decided to create a partnership with terrible airlines like AZ that have been losing money for decades now. Just brilliant.

  12. @ Myles
    +1
    totally agree

    @Nitin @emercycrite
    I wouldn’t blame James Hogan entirely for EY current state.
    I remember those days, when not only this blog was full of sympathie what he’s (EY) been doing.

  13. Say what you like about Etihad going down the toilet, however if your flying BNE to MAN it’s always the cheapest fair and when pooling the points into a VA Platinum account, im always happy with the hospitality in the first class lounge despite my lowly economy seat I’ll keep flying them until Qatar start a service from BNE

  14. @ Jay

    QR is pushing its new route to Canberra very hard on the current rolling seat-back screens (along with other secondary routes like St Petersburg, Sarajevo and, God help them, Cardiff). But last night I was chatting with a couple of Sydney-based Aussie frequent business flyers who had never even considered an alternative to QF1 on their frequent trips. It must be tough to break into markets with halfway decent airlines.

    Personally I’m hoping Qatar are going to add London Stansted soon – they already have a big cargo base there, and they must be watching how Emirates gets on.

    Etihad just feels irrelevant now.

  15. I think the most likely through is that the A350 will be cut out of the order books along side with the 777x, until they re-emerge into profit. Like lucky said the 320-neo will stay.

    They will have to find a strategy mainly with the 787 to compete with emirates in many of their markets

    Thanks

  16. Hogan always runined everything. The cronyism tactics under his business practice was killing him at the end.

  17. @Nitin Exactly!

    It is quite dispiriting how total utter morons like James Hogan do well in this world. Least Gulf Air finally seems to be recovering now but God it’s been painful!

  18. Not surprised lol, lots of money problems going around these days. Hell, the UAE had to impose a sales tax this year lol. I remember when Etihad was barely a regional airline and that wasn’t all that long ago. It seems to me they expanded way too fast.

  19. @James:

    Tim Clark mentioned recently that Emirates would be in closer cooperation with Etihad, didn’t he?

    Wonder what will happen to the airport expansion / construction in Abu Dhabi? If the two airlines become one, how many airports will they need: DIA + DWC + …..?

    Thoughts?

  20. I really like reading the comments written here..it is fact that EY has has an impact on each of us here..for the good or worst..But to be fair it is not entirely Hogan’s fault, although he has a huge contribution to the spiral downward trend..
    I believe a merger with EK is not within any possibilities at the moment. EK will be taking a lot of burden with EY..so what is the next possible outcome?
    A slimline restructuring like GF did..with a lot of sacrifices and reductions to be made. Or a merger with one of the ME carriers GF, WY etc..The ME market and the rest of the world are saturiated with outstanding or good ME carriers. Yes, it is great for the consumers but too much good can lead to an opposite effect, for example EY. It has not enough space or time or financial backbone to react properly..the competition is unforgiving..it does not allow you to make huge mistakes!

  21. It is Hogans fault. Of course he was given unlimited resources to run amok and make an unholy mess and it’s lucky his bosses have deep pockets to take the hit. And of course it’s with their idiocy of employing him in the first place that lays the problem without checking competency or doing due-dilligence on such high profile role – it wouldn’t have been difficult to find out the disaster he was at Gulf Air! But this was a greedy over-privileged man without the skills or knowledge to deliver on the ambitions of his paymasters. I have no sympathy for them, but I do have sympatheties with the many regular people whose jobs maybe on the line.

  22. (Unfortunately there are too many developing countries who hire charlatans from the West thinking of them as superior to local talent, and many of those are actually not so lucky enough to withstand such catastrophic management)

  23. @nitin and Australian airlines before that. He ran great airlines but never good businesses.
    Does EY REALLY need the 77X and 350-1000? Since the 7X launch zero new orders for 351 (except for the VS “we’ll take the 351 and you cancel our 388 orders”).

  24. It is unfortunate as I had high hopes for EY back in 2013-2014. If anything, at least EY is paying their pilots a competitive wage compared to EK, who is having a pilot shortage. Thinking more about it, I wonder why EY pilots have not left yet to work for EK or another airline that may offer them more money/benefits.

  25. Of COURSE it’s Hogan’s fault. He was the CEO: the buck stops with him. The CEO is ultimately responsible for the steerage of the company, and under Hogan’s stewardship it was all downhill after the “Flying Reimagined”/A380 campaign. The partner alliance he tried to build was a colossal miscalculation.

  26. Oh Lord. I agree with @Myles in the fact that Etihad had an impact on our lives.Its always sad to see the degree of deterioration of an airline after re-structuring and cost cutting measures. I just wish they find a way to turn this situation as quickly as possible but if we take into account that before 2011 Ey never turned a profit and it was created more like a vanity project, the future just looks grim for them. EY deserves credit for being an innovator, especially when in comes to cabins. Hope they can still be in business in the future so they continue to innovate.

  27. If airline CEO’s are stupid and rely on even more stupid consulting firms, such as McKinsey, then one cannot be surprised that things go wrong! History had show it very clearly with the Swissair bankruptcy: buying minority stakes in non or under performing airlines. It just does not work! Guess the EY senior management should have thought and analysed ways to expand by themselves!

  28. Regrettably the worst business decision Etihad made was hiring James Hogan. His record with Gulf Air involved adding lots of bling but little substance. Inefficient fleet, lack of proper route planning and seemingly using the airline to create an illusion of his own success and abilities. Left Gulf Air on its knees and was reincarnated as CEO of Etihad will where he brought lots of innovation but little substance and a lack of focus on the bottom line. Whilst an “equity alliance” might sound like a great concept, it is nothing new. IAG clearly have an “equity alliance” but have formed this be bringing together profitable airlines, not basket cases. Ditto for Lufthansa Group. He seemed to forget the basics of running an airline. Most passengers cannot afford a luxurious first class studio or the residence. Training numerous butlers to service the residence. Creating an airline with an inefficient fleet and inconsistent products. Spending loads of money on advertisements starring Nicole Kidman plus many other expensive sponsorships. Basically, the Gulf Air approach with a far greater amount of money to waste.

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