Etihad Selling 38 Aircraft For $1 Billion

Filed Under: Etihad

Wow. Not only did Etihad cancel a lot of new plane orders last year, but now the airline is selling over three dozen of their long haul aircraft, some of which are still in service, and some of which the airline has already retired.

Etihad has been trying to reduce losses

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 $5 billion in the past three years, and is trying to turn that around.

In addition to cutting off or reducing support for many of their unprofitable airline investments (airberlinAlitaliaAir SerbiaAir Seychelles, etc.), the airline has been trying to cut costs for their own operations as well.

At the beginning of 2019, Etihad had over 150 new planes on order, including A321neos, A350-900s, A350-1000s, 777-8s, 777-9s, 787-9s, and 787-10s.

Last year it was revealed that the airline was canceling many of their new aircraft orders, given that the airline is trying to become more “boutique” (aka shrink). The airline still plans to take delivery of 26 A321neos, five A350-1000s, six 777-9s, and some 787s.

Etihad now selling 38 of their long haul aircraft

KKR (an investment firm) and Altavair AirFinance (a commercial aviation finance company) have announced a definitive agreement to acquire 38 Etihad Airways aircraft for $1 billion.

With this, Etihad is selling all of their Boeing 777-300ERs and A330s (both -200s and -300s) with Trent engines. Etihad has been retiring their A330s over the past year or so.

What’s interesting is that just because these planes are being sold, doesn’t mean they’re actually leaving Etihad’s fleet:

  • The 777-300ERs will be leased back to Etihad upon the purchase being finalized in early 2020
  • The A330s will be placed on lease with other operators over the next 22 months, either for passenger operations, or as converted freighters

As Tony Douglas, Etihad Group CEO, describes the deal:

“We’ve made great strides in optimising our fleet structure over the past year, and this investment from KKR and Altavair AirFinance will allow us to take another step forward in this area. This deal will ensure we stand by our strategic and financial sustainability targets by replacing aircraft with the most technologically-advanced and fuel-efficient fleet types. The structure of this transaction also provides us with significant flexibility, meaning we are well placed to respond to future growth requirements.”

This isn’t as desperate as it may sound

On the surface you might say to yourself “wow, Etihad must really be in a cash crunch.” But this actually doesn’t seem like a horrible idea.

I mean, they’re getting an average of ~$26 million per plane, which isn’t exactly great when you consider the list price for these planes is about 10x that much. Then again, airlines never pay listed prices, and realistically that’s just how much planes sell for on the secondhand market. Furthermore, Etihad already has many of these planes parked, so…

Realistically this actually seems like a fair enough strategy for Etihad. The airline is no longer looking to become a massive global airline, but rather wants to become a smaller airline primarily serving Abu Dhabi.

They still have 787s, 777X, and A350s on order, so even if they take delivery of only a portion of them, realistically they’ll be looking to retire other planes in the process. This allows them to lease the 777-300ERs for the time being, and then eventually replace them with newly delivered aircraft.

Bottom line

Etihad is selling over three dozen aircraft for $1 billion. This includes their 777-300ERs, which they’ll be leasing back in the short term, as well as their A330s, which they’ve been in the process of retiring.

Airplanes come at a huge discount on the secondhand market, so the pricing seems reasonable, and the strategy seems to make sense when you consider Etihad still has wide body planes on order.

Comments
  1. I noticed recently that around May Etihad is going from 2x daily flights JNB to AUH to 1x flight, I wonder if this is why.

    I know this as I had booked 3x award tickets JNB-AUH-JFK for a family trip. Due to the cancellation of our JNB to AUH flight we went from an 8pm departure to a 10am departure that day which does not work for us. I have been trying helplessly to get Etihad to move everything forward a day so we would leave at 10am the following day, but they say since the ticket was booked using AA miles and ticketed by AA must deal with it and naturally AA points to EY. Even after getting an Etihad ticketing rep and someone from the AA EXP desk on the phone together today they couldn’t/wouldn’t solve the issue.

  2. I kind of disagree to the comment above. Virgin Atlantic has a similar strategy to them and they have done a decent job in executing it (I would say their other problems aren’t related to this). I think the way they failed was how they executed it. They should have sold it to Emirates and kept their luxury aspect but skimmed down on their capacity. I think Emirates and Etihad would’ve worked well together, with EK being so big and EY being the boutique airline.

  3. Whatever James Hogan touch, it will be doom!

    From British Midland, to Gulf Air to Etihad.

    What a waste of money!

  4. CLICKBAIT ALERT !!!!!!!!

    Selling is not the same as Sale and lease back.
    Sale-Lease back is a lot more common than you think.

    This only indicates a new strategy but can be for so many reasons.

  5. Ben, what are you basing your assessment that Etihad “is no longer looking to become a massive global airline, but rather wants to become a smaller airline primarily serving Abu Dhabi”? IMHO, it would be a strange mindset to have just as they are finally about to move out of their current abysmal facilities, with tons of busing, into a massive new terminal, which will instantly make them far more attractive and competitive.

  6. Etihad has already taken delivery of the A350s, however for some unknown reason Etihad has sent them into long-term storage and is hoping to put them into service in 2021.

  7. It’s a standard sale and leaseback arrangement, pretty common in the financial world. Airasia did something very similar in late 2018, a deal to sell up to US$1.2bn of aircraft. No one thought it strange then! And this deal isn’t unusual in the least

  8. James Hogan (he left Etihad in mid 2017 right?) was once with Gulf Air.. Some people in GCC never learn .

  9. Until a couple of years ago everyone called Etihad a super connector. Along with Emirates and Qatar Airways, Etihad was one of the companies that specialised in taking people from everywhere in the world via Abu Dhabi. But now that Etihad is hanging up its super connector hat they are transitioning into Oman air or Gulf air on steroids. That leaves a space open for a replacement super connector and all indications point towards Turkish Airlines filling the spot when Etihad bows out.

  10. So they supposedly lost $5B in the last 3 years. What was their earnings the previous 3 years before than? Have they ever earned $5B in their history?

    I saw a story where they hope to be out of the red by 2023. That is another 3 years of losses.

  11. AirSerbia made a small profit every year since Etihad invested ranging from € 900.000 to €12.000.000 in 2018 thus making it the only non- failed investment

  12. This is a no brainer. They are not charging their customers enough for what they want to offer. Either they cut reduce cost or charge more and lose customers. People purchase ebase on price. Premium cabins purchased with points etc.

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *