What next for Etihad Airways?

If it’s simply a case of getting anyone in the world from A to B, then the Abu Dhabi-based airline is starting to look like a better proposition than its fellow Gulf carriers
By Anil Bhoyrul
Sat 08 Mar 2014 10:37 AM

If James Hogan is feeling pretty smug this week, he can be forgiven.  The airline he runs, Etihad Airways, has just delivered its third consecutive year of profit, recording a 48 percent jump to $62m for 2013. Revenues, coming in at $6.1bn – a 27 percent jump on  the previous year – look very healthy. As Hogan himself said when announcing the results, “We have hit every financial target for each of the last seven years, bringing sustainable profitability to a business which has grown from just $300m in revenues in 2005 to more than $6bn today.” I have known Hogan from the time he joined Etihad and closely followed his and the company’s remarkable rise. One thing I know for sure is that he actually won’t be feeling smug. More likely, he will be thinking “what next?”

So what is next for Etihad Airways? What Hogan doesn’t like (and people like me do like) is making comparisons with Emirates. Given that Emirates has been in operation for over 25 years, and as a group looks for profits closer to the $1bn mark, you can see why the comparison would be unfair. Emirates has more planes, more passengers and more routes. This isn’t a competition, so why compare?

Well, I beg to differ, simply because of that question as to what might be next. Back in December this magazine championed the Etihad Regional brand as “the real game changer.” We argued that the carrier’s 33.3 percent stake in little-known Darwin Airline, which was then being rebranded as Etihad Regional, could radically shift the balance.

It meant that the Etihad brand would start to connect a vast network of tiny European towns to the bigger European destinations (where Etihad flies to) and then onto the UAE and beyond. If you want to fly from Bolzano in northern Italy to Australia, your best and probably only bet right now is Etihad.

But here’s where things are starting to get interesting – Etihad is now looking at taking this concept outside Europe. Hogan told me last week: “We have had three approaches from airlines in different parts of the world who are interested in becoming part of this concept, so it is possible that you will see Etihad Regional anywhere in the world.”

Hogan won’t specify where, apart from hinting it won’t be in the US.  But let’s look at the options. Etihad already flies to 13 countries in Asia, including three destinations in China alone. Imagine connecting smaller cities in the Philippines to Manila (where Etihad already flies) and onto the UAE. Think of the same for China, Indonesia and Malaysia, and you start to think very big numbers.

But if not Asia what about Africa? The airline has eight current destinations there, from Johannesburg to Cairo.  Teaming up with airlines in other African countries would make a lot of sense. We shouldn’t rule out South America either given the growing trade between that region and the Middle East. Right now Etihad only takes you to Sao Paulo. A few more Darwin-style deals, and the whole continent suddenly opens up. This, in my view, is clearly “what’s next.”

So back to comparisons. At the end of our conversation Hogan made a very telling remark. “We must always remember what we actually do, which is we carry passengers.” How true. If you are looking at profits and revenues, you need to wait a fair while before comparisons with Emirates become credible. But if you  look at it more simply, as how do I get from A to B, in the easiest possible way, then Etihad is starting to look a better proposition than Emirates.

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