James Hogan criticises traditional aviation tie-ups as 'slow to respond and bureaucratic'
Legacy airline alliances have outlived their usefulness, according to James Hogan, the president and CEO of Etihad Airways.
“The traditional airline alliances have evolved into slow-to-respond, bureaucratic organisations which struggle to deliver added value to their member airlines, many of which are no longer compatible with each other," said Hogan in a speech at the International Aviation Club in Washington, DC.
“If we look at the consolidation currently occurring throughout the airline industry, we are also seeing more fragmentation within the alliances. This is going to continue as members seek ways to operate profitably in a very competitive environment with high fuel costs and generally slower global economic growth," he added.
Hogan said a combination of organic growth, codeshares and minority equity investments was building passenger numbers, revenue and profit at Etihad.
“This month we will report our strongest ever first quarter results. Our codeshare and equity partners have made a major contribution to that financial success,” Hogan said.
Etihad Airways owns 29 percent of airberlin, 40 percent of Air Seychelles, 9 percent of Virgin Australia and just under three percent of Aer Lingus. It has 42 code share relationships around the world.
The airline posted a profit of $42m in 2012 and saw two of its equity partners – airberlin and Air Seychelles – return to profitability, meaning that all five airlines are now in the black.
Hogan said that Etihad Airways’ equity alliance of minority shareholdings, enabled the airline to enter markets within local foreign investment limits and, therefore, without the complexities, approvals or expense attached to mergers or larger investments.
“It is easier, faster and far more cost effective to grow through one-on-one partnerships with established, respected carriers than it is to rely totally on our own resources, and to start from scratch in every market we serve.
“We have hand-picked like-minded partners with whom we can work collaboratively to build revenue across a broader network and reduce operating costs," he added.
Hogan said that because Etihad Airways had skin in the game it could go so much further than legacy alliances in thinking innovatively and building relationships that delivered ongoing value.