Report: Etihad Seeking $600 Million Loan

Report: Etihad Seeking $600 Million Loan

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Etihad has been struggling financially for quite a while, and is undergoing a restructuring, as we see them try to increase revenue and cut costs.

The airline has lost nearly 5 billion USD in the past three years. This includes a loss of 1.28 billion USD in 2018, which is awful when you consider how many cost reduction initiatives the airline already undertook.

The airline is owned by the government of Abu Dhabi, and for many years it seemed like the government was willing to pour an unlimited amount of money into the airline, and viewed it as a vanity project.

But there’s no denying that over time that trend has changed, and increasingly Abu Dhabi is keeping the airline on a tighter leash. The results of this have been significant:

Well, it looks like even with their more conservative approach, the airline will now have to look for money from sources other than the government.

Skift is reporting that Etihad is allegedly seeking a loan of about 600 million USD to help make initial payments for planes that they have on order. While an Etihad spokesperson hasn’t officially commented, Skift quotes “people familiar with the matter.”

If true, the airline has gone from getting virtually unlimited funding from the government, to being under closer scrutiny from the government, to now seeking outside financing.

They recently canceled 61 widebody orders, including Airbus A350s and Boeing 777-9s, though the airline still has a few of the planes on order, along with Boeing 787s.

So the fact that they’re seeking an outside loan for their already scaled back fleet plans is noteworthy. I’ll be curious to see how this plays out…

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  1. The nice Paul Diamond

    @ Eskimo

    Reminds me of the joke in an ancient comedy series where one of three friends won $100,000 in a lottery. The 2 others come back a week later and find the winner broke.

    “How did you spend $100,000 in a week?!”

    He replied: “well, half of it went on booze and prostitutes. But the other half I just wasted”.

    I’m not sure into which category you’d put “investing in Etihad”.

  2. kyall Guest

    @eskimo, Thanks for your effort in hiur response, Im unfamiliar with U.S lotto and tax as I'm on a different continent,
    Clearly I was making a joke alsi

  3. Traveler New Member

    @callum - don‘t underestimate the amount of back-office and operational savings plus schedule alignments that could be generated by such a combination. It also helps that both key cities (Dubai and Abu Dhabi) continue to have a significant amount of direct flights. For someone in Europe flying to Australia, it won‘t matter if they fly LHR-AUH-SYD or LHR-DXB-SYD if they have to change planes anyway. A combined „United Emirates“ might offer flights every 2 hours...

    @callum - don‘t underestimate the amount of back-office and operational savings plus schedule alignments that could be generated by such a combination. It also helps that both key cities (Dubai and Abu Dhabi) continue to have a significant amount of direct flights. For someone in Europe flying to Australia, it won‘t matter if they fly LHR-AUH-SYD or LHR-DXB-SYD if they have to change planes anyway. A combined „United Emirates“ might offer flights every 2 hours from LHR.

  4. callum Guest

    Ray - That's exactly how a country works, the bits that are doing well help out the bits that aren't... Plus of course, Abu Dhabi has bailed out Dubai in the not too distant past.

    Traveler - Having hubs in Abu Dhabi and Dubai makes no sense. They might as well just stay as 2 different airlines if they're going to do that.

  5. Eskimo Guest

    @Kyall

    I hope you don't buy lotto regularly.
    1. To get 700M after Uncle Sam takes his cut means you need to win over a Billion pre tax.
    2. Here is the real kicker, to get that much in lump-sum after tax you probably have to win close to 2 billion.

    So if you were to win 2 billion in lotto, are you really going to lend money to Etihad and live your...

    @Kyall

    I hope you don't buy lotto regularly.
    1. To get 700M after Uncle Sam takes his cut means you need to win over a Billion pre tax.
    2. Here is the real kicker, to get that much in lump-sum after tax you probably have to win close to 2 billion.

    So if you were to win 2 billion in lotto, are you really going to lend money to Etihad and live your normal life while trying to squeeze some freebies from the airline?

    You know if EY defaults you would set 2 world records. Not only would you win the largest in history, you also end up as the worst lotto winner in history ever. At least others who won and used up all their winnings did get to enjoy the money while it last.

  6. mahjong Guest

    @Jeff No.
    I would be shocked if the Emir of Abu Dhabi does not provide a backstop to EY's financing needs
    were those needs to ever become dire.

    He bailed out the Emirate of Dubai. He will bail out his own airline.

  7. Jeff Guest

    Taking an Etihad flight on 4/27. Should I be worried?

  8. lovetospendit Guest

    @schar yes... but. The rulers of UAE are in Abu dhabi and things are more complicated that what you describe.
    The real money and big money is in abu dhabi, and abu dhabi will not give up having a flagship.
    I really believe that this will never happens in a near future.

  9. Lovetospendit Guest

    it's cheaper to loan regarding how cheap the money is on the markets than using they own assets. Basics. Nothing new, they did in the past and they are right to do it this way.

  10. schar Gold

    they should just give up already and let Emirates take the reign

  11. Traveler New Member

    My guess: mid-term Etihad gets integrated into „United Emirates Airlines“ with two hubs like FRA and MUC for LH. And Emirates can get the earlier slots for the canceled Etihad A350s. Alone Etihad will not survive given the relative strength of QR and EK.

  12. Ray Guest

    @Eskimo don't count on it. Other emirates like Dubai, Sharjah, Al-Ain, and RaK (to name a few) shouldn't have to foot the shortcomings of Abu Dhabi's project. Don't forget this is all because of one James Hogan and his extreme recklessness.

  13. Howard Guest

    @Kyall no I wouldn't, because Etihad is a sinking ship and I will likely lose my investment.

  14. Alex Member

    @Michael makes a good point. This really isn’t a big deal.

  15. Vidit Guest

    Etihad's stake in Jet Airways and JetPrivilege has a combined worth of just over $600 million, which I believe they've been trying to sell off recently. Shouldn't that cover them instead of taking out a loan?

  16. SS Guest

    ......and here in India Jet Airways is hoping Etihad funds them for it to survive. What an irony!

  17. Kyall Guest

    If you were lucky enough to hit one of the U.S's crazy lotto draws, Say you won and hit $700M after taxes. Then Eithad wanted to borrow $600M from you with a substantially higher interest rate than what a bank could give you for a term deposit as well as potential a other perks that could be dicussed.
    Would you loan them the money??? and what else would you ask them for in return???

  18. Credit Guest

    Someone needs to slap the Etihad CEO across the face, make him sell the stakes in 2nd rate airlines and have them join Star Alliance!
    Done!
    Airline saved!

  19. Srihari Member

    Wait a second..Isn't EY owned by the Abu Dhabi government? Why not seek a loan from them lmao.

  20. Stu Member

    Hahaha @Debit - right on the money! No doubt EY will make sure they have white CEOs to curry favor with the rest of the world, unlike QR.

  21. Bobby J Member

    The ultimate plot twist in this saga will be if Delta steps in to save them. Kills three birds with one stone: grants a more useful connecting partner in the Middle East than Saudia or MEA, a backdoor to controlling Alitalia, and a potentially lucrative JV partner.

    It will never happen, but man would it be ironic.

  22. pho tastee Guest

    I got $6 bucks to loan

  23. Michael Guest

    Etihad took out loans before. This is actually a non-message. With interest rates where they are they would be stupid to not load up on almost free money.

  24. Eskimo Guest

    Can't ask the sheikh for more money?

    UAE's combined sovereign wealth fund is over 1.3 trillion and only 2nd to China.

    600 million is just 0.04%

    Interesting to see if UAE investments are also in financial decline.

Featured Comments Most helpful comments ( as chosen by the OMAAT community ).

The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.

The nice Paul Diamond

@ Eskimo Reminds me of the joke in an ancient comedy series where one of three friends won $100,000 in a lottery. The 2 others come back a week later and find the winner broke. “How did you spend $100,000 in a week?!” He replied: “well, half of it went on booze and prostitutes. But the other half I just wasted”. I’m not sure into which category you’d put “investing in Etihad”.

0
kyall Guest

@eskimo, Thanks for your effort in hiur response, Im unfamiliar with U.S lotto and tax as I'm on a different continent, Clearly I was making a joke alsi

0
Traveler New Member

@callum - don‘t underestimate the amount of back-office and operational savings plus schedule alignments that could be generated by such a combination. It also helps that both key cities (Dubai and Abu Dhabi) continue to have a significant amount of direct flights. For someone in Europe flying to Australia, it won‘t matter if they fly LHR-AUH-SYD or LHR-DXB-SYD if they have to change planes anyway. A combined „United Emirates“ might offer flights every 2 hours from LHR.

0
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