Etihad flies into the red

Courtesy Etihad Airways

Are you surprised that one of the big three Gulf carriers has flown into the red? For the first time since 2011, Etihad Airways reported a hefty loss of US$1.87 billion in 2016 compared with a profit of US$103 million a year ago.

Chairman of the Etihad Aviation Group Mohamed Mubarak Fadhel al-Mazrouei said “a culmination of factors contributed tot he disappointing results.”

The United Arab Emirates airline blamed it on “one-off impairment charges and fuel hedging losses”.

It is a wonder how airlines would always blame poor hedging decisions for losses as if they were not responsible for their failure to correctly read the market. Etihad’s woes include billion dollar charges on aircraft and certain assets, as well as financial exposures to beleaguered equity partners including Alitalia and Air Berlin. Etihad owns 49% of Alitalia and 29.21% of Air Berlin. This has called for some reflection on the airline’s acquisition program.

But Etihad said the core airline business remained solid and strong. Although load factor declined slightly from 79.4% to 78.6%, passenger numbers increased from 17.6 million to 18.5 million.

Etihad’s new CEO Peter Baumgartner however was cautious about the future. He said: “We are in an industry characterized by overcapacity, declining market sizes on key routes and changing customer behaviour as a weak global economy affects spending appetite.”

Understandably, this comes at a time when the United States are imposing restrictions on travel from the Middle East and the airline too is caught in the diplomatic Qatar crisis that has affected regional routes.